Increase in Home Prices along with Higher Rents

by 05 Jul 2012

(TheNicheReport) -- The red-hot real estate market is getting even hotter thanks to regional property appreciation. This situation was recently reported by online real estate market analysis site Trulia, and it is bound to attract more real estate investors to some metropolitan areas where urban dwellers are taking a break from the American Dream of homeownership in favor of lease agreements.

According to the figures released by Trulia, monthly rents in the United States climbed by 5.4 percent on an average basis since June 30th of the previous year. This increase is not surprising given the pace of foreclosures over the last few years, as well as the incredibly strict credit and lending guidelines imposed on mortgage applicants.

In some metropolitan areas like San Francisco, renters are now paying almost 15 percent more than in 2011. This has had a positive, yet disproportionate, effect on real estate values in the San Francisco market, where residential properties are now priced 2.5 percent higher than they a year ago. A similar situation can be observed in nearby Oakland, where rents went up by 10 percent, although home purchase prices barely inched up compared to twelve months ago.

Other Cities Where Renters are Paying More

Boston, Denver and Miami are also hot rental markets, according to Trulia. In those three cities, landlords are now asking for monthly rent payments that are at least 10 percent higher than they were in June 2011. Real estate prices across several neighborhoods in Miami climbed at a comparable rate, but in Boston they actually fell a bit.

Although large metropolitan areas always tend to attract renters in greater numbers, some less populous markets are also enjoying an influx of lease agreements. In Texas, the Fort Worth housing market reported a 15 percent increase. The same goes for Columbus, Ohio. Home prices in Colorado Springs climbed a respectable 4.3 percent while rents are also higher: 15 percent over the last twelve months.

Temporary Rallies?

The year-over-year increase in home values and rentals are auspicious, but they may not last. Such was the warning by Jed Kolko, chief economist at Trulia. Some of the cities that have been deemed the most attractive for investors to purchase rental properties in, like Detroit and Las Vegas, are still facing a backlog of foreclosures. There is always the risk of an avalanche of distressed properties flooding the market at once and eroding value from several neighborhoods.


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