Rising Apartment Rentals Report

Apartment Rents Set to Rise, Fueling Inflation: NAR

Jimmy McMillan of the Rent is Too Damn High Party

WASHINGTON (AFP) – US apartment rents are expected to climb next year as the economy recovers from recession, a rise that may fuel inflation, a real-estate industry group said Monday.

Multifamily real estate will star in an overall modest improvement in commercial property markets in 2011, the National Association of Realtors said in an outlook report.

NAR said ailing commercial real-estate markets — office, industrial, retail and rental housing — were flattening out after a steep plunge amid the worst recession in decades.

Lawrence Yun, NAR chief economist, predicted a rise in demand, as the economy slowly recovers from the downturn that officially ended in June 2009.

The number of people setting up a new home has plummeted amid high unemployment and plunging home values after a housing bubble collapsed more than three years ago.

“Multifamily housing is the one commercial sector that has held on relatively well in the past year, and can expect the best performance in 2011,” he said.

Yun predicted apartment rents could rise by one to two percent in 2011, after having fallen in 2009 and showing no growth this year.

“This rent rise therefore could start to force up broader consumer prices as well,” he said.

The cost of rent or mortgages is the biggest component in the government’s consumer price index, accounting for 32 percent of its total weight, he noted.

Multifamily vacancy rates were forecast to decline from 6.4 percent in the current quarter to 5.8 percent in the fourth quarter of 2011.

Consumer price inflation has remained subdued in recent months despite a rise in energy prices, while the core inflation has trended lower, the Federal Reserve noted last week in the minutes of its last policy-setting meeting.

The central bank used weak inflation as a key justification for its controversial plan to buy an extra 600 billion dollars in Treasury bonds to juice the flagging recovery.

Critics, including several participants in the November 2-3 Federal Open Market Committee meeting, have said the plan risks spurring inflation.

NAR said the outlook for the office and industrial markets had improved, with modestly declining vacancy rates expected in 2011, while the retail sector would essentially hold steady.

Vacancy rates stuck in double digits, nevertheless, signal rents would remain under severe pressure.

“High vacancy rates imply falling rents,” Yun said.

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Ex law school student. I was kicked out for revealing I had a heart actually beating inside. I used to be in a modern dance company. I'm working on my 7 miracles to be proclaimed a saint by the pope. #1 is really hard, but once i get over that hump the other 6 will be a cinch.

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