More fallout from the current housing slump – the cost of renting a home stagnated in 2007, according to an exclusive report for CNNMoney.
January 17 2008: 10:51 AM EST
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NEW YORK (CNNMoney.com) — Home prices dropped last year in most cities around the nation, and now rents are flattening out in many of the markets worst hit by the housing downturn.
According to data from Investment Instruments Corp. generated by their Rentometer.com site and supplied the data exclusively to CNNMoney, the median monthly rental bill for a sampling of 10 metro areas all around the United States rose just 0.5 percent in 2007 from $1,457 to $1,465.
Rentometer, which publishes rent-comparison statistics online, does not have historical rent data prior to 2007, but according to real estate consultant M/PF YieldStar, national rent increases had averaged between 2 and 3 percent annually the previous several years.
Home prices post record decline
“The major factors having an impact on housing prices are foreclosures, which make more rental property available,” said Owen Johnson, president of Investment Instruments, “and also foreclosures that are not happening.”
In the latter case, according to Johnson, many speculators bought properties to “flip,” selling them quickly in a rapidly appreciating market. In some Sun-Belt areas, investors bought condos and other properties while they were still in development, to sell when a project finished.
Other investors bought existing single-family homes or other properties, intending to do cosmetic improvements and then sell them at a profit. But before they could do that, the slump hit, and home values dropped. Instead of selling at a loss, investors of all stripes are now renting them out.
Of the 10 areas sampled by Rentometer, Atlanta and Houston rents declined the most, plunging 12.8 percent for the year. Median monthly rent for all rentals in Atlanta is now $884, and in Houston it’s $779.
The New York metro area had the highest median monthly rent in 2007, at $1,729, and it posted the biggest increase of 12.8 percent. San Francisco, where it grew 8.5 percent to $1,685, and Boston, where it rose 6.8 percent to $1,528, also had strong years.
San Francisco and New York are examples where Johnson said “massive demand” more than offset increased supply. These cities compete in a “global market,” he said, and, by world standards, they’re still relatively inexpensive for foreign currency-based consumers taking advantage of a weak dollar.
Other cities reporting big declines included Washington (11.8 percent), Miami (9.0 percent) and Phoenix (7.3 percent).
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