2006 Forecast for Renters

With housing prices rising steadily, the economy on the upswing and real estate developers (the people who build new apartment complexes) are re-grouping and looking for new projects, rents will likely rise in 2006. But alas, there are some parts of the country where renters will enjoy the benefits of high vacancy rates, move-in specials, and low rents.

West Coast

Renting on the West Coast is extremely expensive. Landlords know that demand in these areas is high, so they can charge high rents without fear of vacancy. With steady demand, landlords can also get away with never having rent specials or move-in incentives. The average rent for a two bedroom apartment in the San Francisco area is around $2,000 a month. Since southern California is already heavily populated, there isn’t much room for new construction. Therefore, the current demand will have to compete for the existing resources, which drives up rent prices. Vacancy in these areas will be close to zero, because there is a limited supply with a high demand. The upside for renters is that they may find it easier to break a lease – because Mr. Landlord won’t be worried about finding another tenant – but causes rents to rise for the same reason. Double-digit rent increases will be common. For example, if you pay $1000 per month, you may be asked to pay $200 more per month when your lease expires. We strongly recommend that renters sign the longest possible lease they can (so long as they’re sure they’ve found a good apartment and can stay for the duration). With growth rates expected to be high in 2006, there is no lull in sight.

Southeast

Southern areas such as Florida are also in high demand, so landlords can charge exorbitant rents without any negative consequences. Renters will find that Florida is a tough market to rent in. The average rent for a two bedroom apartment in the Miami area is $1,000. With high rise apartment complexes in abundance, we’re not likely to see much new construction, which means lower vacancies and fewer rent specials. From Boca Raton to Gainesville, the story of 2005 was of apartments “going condo” and the story of 2006 will be of low vacancy rates and high rents. Living in this area, you can expect to see your rent rise.

Raleigh-Durham was ranked in 2005 as the best place to live. Developers are selling their apartments in California and Florida and investing in new apartment complexes throughout the Southeast in markets such as Raleigh, Memphis, Atlanta, and Austin. New construction means greater vacancies, better rent specials, and lower monthly rents! Existing apartments must compete with each other and with new developments. Attractions of this area are its affordability, bustling economy, and quality of education and life. And indicators suggest that it will remain number one throughout 2006. Memphis and Austin are great choices for those looking for a unique cultural experience that won’t leave them penniless. Rent growth in the area has been slow since owning a house is relatively cheap. Houston, Dallas, and San Antonio have all seen vacancy drop due to Katrina and the in-flux of renters displaced by the storm. Rents will be higher and specials fewer, until later this year when evacuees return to the Gulf Coast.

Northeast

Colonial mansions, old money, crab cakes at McDonalds… the northeast has the reputation of being just a bit on the pricey side. Renters should avoid markets like Washington D.C. and Manhattan. Since demand is high, landlords flock there to take advantage of the rising growth rates. Average rent for a two bedroom apartment in this area is $1,400 a month and over $3000 a month in New York city. Vacancy rates are low thanks to the high demand to live in the area, which means there is little if any need for landlords to offer rent specials. This will continue to mean higher rents overall.

However, rents in Richmond have decreased over the past year, and are expected to stay relatively low for awhile – the average costing $712 per month. Richmond is diverse with many cultural influences as well as outstanding educational institutions. It is close to the ocean, as well as D.C. And hey, if you can’t afford to live in D.C., at least you’ll be close!

Midwest

Although rent rates are rising in places such as Cincinnati, growth throughout the “fly-over” is slow. The average Cincinnati rental price is around $657 per month. The city is known for its small town feel with big city benefits, such as large, fast growing companies for job seekers. Because much of the Midwest is available for development, new construction is an option. This will ensure fairly high vacancy rates for some time because any influx of new residents will entice new residential developments. And this means move-in specials, low rent increases, and generally good selection for renters. Eager to keep their properties filled, landlords will keep rents lower.

Indianapolis touts nearly flat rental rates, with growth of less than one percent last year. Another attractive benefit to the city is its dedication to the population. The mayor has recently put into action an Indianapolis Works! campaign to streamline local government and tax structures. St. Louis, although growth is not flat, claims fairly low rental rates of around $679 per month.