Freddie Mac Reports Rental Market is Bright Spot of U.S. Housing Market, Rents Expected to Increase in Coming Year

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According to Freddie Mac's latest U.S. Economic and Housing Market Outlook for June 2012, rental market activity has been a bright spot for the housing market, and due to rental demand by those postponing homeownership, further increases are expected in the coming year.

Frank Nothaft, Freddie Mac's vice president and chief economist tells World Property Channel, "Further increases in rental demand are likely in the coming year as newly formed households postpone homeownership decisions until the economy strengthens and they have accumulated sufficient savings.  Overall apartment market trends may show further vacancy declines and rent gains, with property values improving as well."

Outlook Highlights                                                                        

• Over the year ending March 2012, an additional 1.5 million households moved into rental housing, a 4 percent increase in a single year.

• Rental vacancy rates have dropped roughly 2 percentage points over the past two years.

• While nominal rents rose (2 to 4 percent) during the year ending March 2012, average rent on an inflation-adjusted basis remained below where it had been for much of the decade prior to the Great Recession.

• Multifamily property values are up on average about 25 percent during the past two years from their trough during the first quarter of 2010, according to the National Council of Real Estate Investment Fiduciaries index, but still about 14 percent below their peak prior to the Great Recession.

• Starts of buildings with at least five apartments have jumped 48 percent in the first five months of this year when compared to the same period a year ago.