(snip)"As they and others lease instead of buy, rents have risen 7 percent in the past year, according to a new analysis by Delta Associates. In suburban Maryland, rents for luxury high-rise apartments rose 11 percent.
About 6,500 additional renters leased units in the past year, up from about 4,400 in the previous year, according to Delta Associates. The Washington area has one of the lowest apartment vacancy rates in the nation, down to 1.7 from 2.4 percent a year ago, compared with a national average of 5.7 percent.
The rent increases are confounding industry expectations that rents would fall because of the huge number of new condominiums, many of which were sold to investors who have put them up for rent. Experts say prices would rise even faster without the additional condos.
Even so, rents are expected to rise 5 to 9 percent annually over the next few years, said economist Gregory H. Leisch, chief executive of Delta Associates.
More than a half-dozen projects have recently shifted from proposed condo complexes to rental apartments. Delta Associates projects about 2,000 units are being shifted or will remain as rentals this year, with another 2,000 going that route next year."(snip)
" but we've clearly see fatigue on the part of the consumer," Coletta said. "Traffic has dropped off, contracts have slowly declined. You see the writing on the wall at the same time apartment fundamentals are improving. It makes the business decision a pretty easy one."
Instead of converting the Virginia Commons complex in Dumfries into condos, its owners have decided to spend "several million dollars" upgrading the place and renting it to people who make $70,000 to $90,000 a year -- too much to qualify for housing assistance but too little to be able to afford to buy a home."(snip)
While the focus of the article is on real estate developers changing projects from condos to rentals, the larger point is clear. People are having increasing difficulty affording / financing the outright purchase of a house / condo. This puts upward pressure on rental prices in the same way that it puts downward pressure on house / condo prices. The segment of the population most affected are exactly who the article says ... people who are earning too much money to qualify for housing assistance but not enough money to be considered 'a good enough credit risk' for a large mortgage... i.e. middle class Americans earning $70k to $90k per year ... i.e. the same group of people who have typically been regular strip club customers ! With economists projecting annual rent increases in the range of 5-9%, on top of projected energy price increases, tax increases, and 'stagnant' earnings, this will not leave much 'discretionary budget' left over to spend in 'middle class' strip clubs !
But every cloud has a silver lining ... which in this case should be nice long term cap gains and dividends from Apartment REITS.
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