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Home Rental Rates Continue to Rise

By Sari R. Updated on 12/22/2014

House and moneySince the decline in housing prices, more homeowners have been less motivated to sell and more inclined to keep their homes by renting. This factor combined with others has helped rental rates reach a 15-year high.

Recently, the Department of Commerce’s Census Bureau noted that rental vacancies have dipped to 8.8% in the quarter, 0.9% lower than a year earlier and 0.6% below the previous quarter. This has caused homeownership vacancy rate to stand at 2.2% during the period, a decrease of 0.4% from a year ago and 0.1% from during the fourth quarter of 2011. During the first quarter, there has also been an increase of 0.6% to the 34% mark of families that rented their home.

Analysts at Capital Economics believe that the rental rate may actually climb up even fruther since less households own their own homes. This obviously is great news for landlords. Home rental yields are currently near the 6% mark which is a great percentage.

According to the analysts, the recent housing recovery is primarily driven by investors and cash buyers purchasing homes to rent out. This has contributed to a rise in rental rates within the nation.

In accordance to what the analysts have stated, the Census Bureau also reported a national homeownership rate of 65.4% in the first quarter, a 1% dip from a year ago and 0.6% from a quarter before. Statistics have shown that the rental vacancy rate was higher in the South at 10.8%, and lower in the West at 6.3%. The Northeast experienced an annual increase during the first quarter from 6.8% to 7.8%. Vacancies inside principle cities at 8.8%, in the suburbs at 8.7% and outside metropolitan areas at 9.2% had not experienced much change.

Capital Economics analysts forecast still strong demand and limited supply to contribute to rental inflation of 3% later this year.  They also expect the rental yields to improve to 5.75% which comfortably beats the yields available on Treasurys.

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About The Author:
Sari R.
Sari R. is a mortgage editor for Lender411com. She graduated with a Bachelor's Degree in Screenwriting and Public Relations/Advertising from Chapman University. She can be reached at sarelyn@lender411com.

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