A 2010 survey commissioned by the National Apartment Association and conducted by market research firm Harris Interactive found that 76% of consumers currently believe that renting is a better option than owning a home. Of all respondents, 64% cited not being responsible for major repairs or maintenance as the primary reason; 50% also indicated financial reasons, such as wanting to avoid being impacted by an unpredictable real estate market or potential foreclosure. (If you want to save your home, avoid bogus offers and take matters into your own hands. To learn more, check out Avoiding Foreclosure Scams.)
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Has this demand for rental properties driven up prices? Not necessarily. Many areas have seen an influx of rental properties, through both newly constructed apartment complexes and a glut of homes that are being offered for lease while anxious homeowners wait to sell in sluggish markets. Rental property investors in many markets have had to respond by lowering prices to compete and fill up units. While you might not find any great deals in New York City where the average monthly rent tops $2,800, higher vacancy rates, coupled with lower average monthly rents have created renter's markets in these six states.
The Sunshine State's cities of Jacksonville, Orlando and Tampa in particular show signs of being renters' markets. Florida's largest city, Jacksonville, for example, is forecast to have a 14.5% vacancy rate for 2010 - well above the national average of 8% - because of its subdued rental housing demand. Apartment demand in Jacksonville, as well as many other markets, is tied to construction, retail, leisure and hospital jobs. Orlando cut nearly 40,000 jobs in these industries during the 2008 recession, leading to a spike in vacancy. The median rental price in Jacksonville is about $747 per month.
Elsewhere in Florida, Orlando is expected to have a slightly lower, 11.2% vacancy rate - still above the national average - with monthly rent costing about $806. Tampa should see a 10.8% vacancy rate for 2010, with rent prices falling in near Orlando's at $767. (More than money goes into this decision. Find out more in Are You Ready to Rent?)
The Grand Canyon State is known for its desert climate, with hot summers and mild winters. High unemployment rates, however, have driven up vacancy rates. Tucson, Arizona's second largest city, in fact, is forecast to have a 12.7% vacancy rate, the highest rate in over two decades. Monthly rents have fallen to an average of $611 in order to entice new renters. Arizona's capital and largest city, Phoenix, should have vacancy rates reaching 12.6%, with monthly rents averaging $729.
The Lone Star State has experienced unemployment rates hovering around 8.5%, rates not seen since mid-1992. Houston, the largest city in Texas and the fourth largest in the United States, was plagued by low oil prices and mass layoffs during 2009. Construction of new rental units will further increase vacancy rates, resulting in overall lower rental prices. Houston is forecast to have a higher-than-national-average vacancy rate of 12.6%, with median monthly rents falling in at $737. Austin, the state capital, should see 10.6% vacancy rates, with rents average $849 per month.
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The Silver State's unemployment rate has skyrocketed since 2008, reaching levels greater than 14%. 85% of the state's population resides in the two metropolitan areas of Las Vegas and Reno. Las Vegas, in particular, has been hard hit by the economy and is expected to make a slow recovery due to high unemployment, a difficult housing market and soft spending. An imbalance in supply and demand has created a renter's market, with vacancy rates expected to exceed 18% in certain submarkets. Overall, vacancy rates are expected to be 12%, with monthly rent averaging $782.
The Peach State saw unemployment reach highs of 10.4% following the economic slump of 2008. Georgia also has one of the highest rates of foreclosure in the nation, adding to its economic turmoil. The housing market is depressed, and along with it, the rental market. For renters, the news is good. The vacancy rate is expected to reach 11.6% - one of the highest rates in the country. Monthly rent will average $800, significantly lower than 2008 prices.
- North Carolina
The Tar Heel State has experienced high unemployment and rates of foreclosures since 2008. While its capital is Raleigh, North Carolina's largest city is Charlotte, where 40% of all housing units are rentals. An increasing portion of rental units are in the form of houses and condos that have turned for-rent, resulting in increased competition among rental property owners.
To compete with new market participants (these now for-rent properties) many apartment complexes have been forced to greatly reduce monthly fees and/or offer additional perks to renters, such as first month free promotions. Overall, Charlotte is forecast to see an 11.5% vacancy rate, with monthly rents averaging $742. (Timing is everything. Learn more in Is Now The Time To Buy Or Rent?)
The Bottom Line
High unemployment, soft sales, foreclosures and newly constructed complexes have all contributed to higher vacancy rates and lower monthly rents in many markets across the United States. What this has created is a renter's market - one where the renter has the upper hand - in terms of availability and costs. As real estate investors adapt to current economic conditions, renters in many markets can expect a greater selection of properties at better rates, often including perks such as free month's rent, or additional conveniences such as 24-hour on-site fitness centers - anything to entice new renters and keep existing ones. Rental properties in these six states are doing what they can to draw in new customers, and, as a result, consumers can take advantage of a renter's market.
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