As the U.S. economy is still struggling with an uneven recovery, more people are opting to rent than to buy. This has driven up rental rates through the roof. However, a new report reveals that the pace, at which rates have been rising, is slowing down as supply increases.
The report, compiled by CoStar Group - a real estate intelligence firm, revealed that asking rents rose 2.5 percent in the first quarter of 2014 and vacancy rates are now at 5.6 percent across the country. But, the pace has indeed been slowing down as compared with figures recorded in 2010 and 2012.
Experts say the supply of multi-family homes relieved the pent-up demand and prices for apartments.
"The first quarter of this year, 54,000 new apartment homes were delivered to the market [nationally] and demand was about 27,000 apartments," Hans Nordby, managing director of CoStar Group, told MarketWatch.
Reis Inc., a New York-based property research firm, told Bloomberg that 25,135 new condo units were completed in the first quarter alone. That is a 43 percent increase on a year on year basis. The fresh supply will dampen rent rates in the coming years.
However, the experts also believe that the low vacancy rates will increase in the future, especially as mortgage interest rates remain low and supply of singl-family homes inch up.
Recently, the US Commerce department revealed that building permit on single family homes went up 3.7 percent even though housing starts in the sector slumped 5.9 percent. Builders are bullish on the single-family construction market and believe that an improving economy and more jobs will help people buy homes.
For now, renting is the hottest trend in town. Check out the map (courtesy: Apartment Guide) below that shows average rental rates in and around the U.S. Prices per square feet have been weighed against $769, the average price for an entry level studio apartment.
