Rentals upstage home purchases in February04/11/2012
While many recent reports have indicated more people are interested in purchasing a home, newly released data suggests there's still a higher demand for rentals.
According to a new study released by Zillow, median rents in the country rose an average of 2 percent in February on a year-over-year basis. Meanwhile, home values diminished over the same period, dropping 4.5 percent.
In addition, Zillow's Rent Index revealed a rise in median rents for almost 70 percent of the metropolitan areas surveyed. Meanwhile, only 8 percent of metro areas experienced increases in home values.
The rental market has been particularly robust in cities where home values have fallen considerably. For instance, in Chicago, rents rose nearly 8 percent over the past year, while home values have diminished 11 percent. And in Philadelphia, rents jumped nearly 15 percent over the same time span, as home values in the metro area have dipped 5.4 percent, Zillow reports.
One of the biggest weights on the housing market is the surplus of foreclosures. Zillow notes foreclosure re-sales comprised just over 20 percent of all sales in February, one-tenth of a percent more when compared with March 2011. In February of last year, foreclosure re-sales made up 19 percent of all home sales.
Svenja Gudell, senior economist at Zillow, said foreclosures have proven to be a significant hindrance to the housing sector bouncing back.
"We have made it through the worst of the housing recession with a bottom on the horizon, but the deep backlog of foreclosures, elevated negative equity and high unemployment are all still obstacles on the road to recovery," said Gudell. "The rental market remains a bright spot in the housing market, where many markets, especially hard hit ones, are experiencing significant annual rent appreciation and drawing the attention of investors."
However, housing experts believe home purchases will eventually outdo rentals. Budge Huskey, president and chief operating officer of Coldwell Banker Real Estate, told U.S. News and World Report that several consecutive months of positive housing data will eventually pay dividends, as low closing costs and record low mortgage rates make it the ideal time to buy.
"The last couple of years we have really seen principally first-time home buyers and investors in the market, and we are now beginning to see a return of the move-up market and the second home market," said Huskey. "The fact that those buyers are returning to the market is very much a positive."