Rental rates are declining along with home prices in the majority of the nation, according to new reports. It’s good news for renters, but another sign that the economy is weakening as job losses and worsening consumer confidence force many renters to seek cheaper housing.
The new studies also indicate that investors are less likely to build new projects or buy multifamily projects. Occupancy rates also declined in the fourth quarter along with rental rates, according to RealFacts Inc., an online data analysis company.
A Housing Predictor study found that in 25 metropolitan markets home rental prices are declining at an average ranging between 10% and 20% from a year ago as the softening economy and a surplus of rental inventory damage the overall economy.
“This data for 2008 indicates that the year’s widespread economic problems have finally affected the rental market,” RealFacts said. “The choice to invest in income property for the last several decades has been based on the assumption that rents would continue to grow. In 2009, investors are likely to evaluate rental properties based on current income alone.”
Rents declined in nearly every metropolitan market between September and December. The decline was matched by a nationwide decline in occupancy from 92.9 percent in September to 92.2 percent in December, according to RealFacts.
The surveys also show that renters should have an easier time finding rental housing for less money than a year ago. But not every where, including Santa Cruz, California in the greater San Francisco Bay Area where occupancy rates in large apartment complexes average 96.5 percent and rents average $1,637.
In commercial real estate rental rates are also declining. Economic malaise has forced companies to cut jobs, dropping demand for offices, warehouses and other commercial properties.
In Raleigh, North Carolina the president of NAI Carolantic Realty, Jimmy Barnes sees a gloomy horizon. “The commercial real estate market faces its worst year” since the 1990’s says Barnes amid the nation’s economic ills.
Many people in Raleigh like so many other areas of the country felt they were some how immune from fall out of the deteriorating economy. As the economy boomed companies expanded and rental properties demanded higher prices, but the reverse is happening these days.
It’s taken longer for the commercial real estate market to feel the effect of the recession, which means that it’ll take longer to rebound, according to Wachovia economist Mark Vitner. “The bad news is we won’t be in a position to recover until 2011,” said Vitner. Other economists are even more down trodden about the fate of the nation’s economy wondering how long it will take for the rescue package being worked out by Congress and the White House will take to really make a difference.
But lower mortgage rates are making it more attractive for renters to buy homes, despite the economy.