I was reading an article today and found it interesting. During the second half of 2011, we have seen a dramatic increase in demand for rentals in the Bay Area. In all, I would say with that demand, we have seen rents rise about 15-20% in all over this past year. According to Lawrence Yun, chief economist of the National Association of Realtors, housing affordability is about the best its ever been, but tough lending conditions have made it difficult for buyers to take advantage of these good conditons. Investors, many with cash, are a good portion (22% in August) of the buyers.
Throughout the nation, rents rose better than a 3% annualized rate in the last quarter of 2011, making for an attractive rate of return for investors. There is no reason to believe this rent growth will slow down, given the favorable demographics of the rising number of young adults over the next 20 years, low construction rate of apartments and the high number of owners of floreclosed homes who can’t buy in the near future.
If annual rates continue a gain of around 3.5%, then rents could double in 20 years. If rent gains reach 5% this doubling would only take 14 years.
Investors can expect strong rent returns and home price appreciation over the long haul. According to Yun, with the real estate bubble clearly gone, future home prices should follow the future rent growth path. That means home prices could once again have a significant appreciation over the next 14-20 years.
Want to learn what more, visit http://economistsoutlook.blogs.realtor.org