US cities see apartment rents soar as home ownership falls
A new Morgan Stanley analysis sheds some light on America's rising rents.
Home ownership rates in the US have plummeted to a near five-decade low in the aftermath of the US housing bubble, leaving millions of Americans to rent apartments instead of buying houses.
Some 2.5 million households shifted into multi-family properties between 2009 and 2014, according to data put together by Morgan Stanley's Richard Hill and Jerry Chen, while the number of owner-occupied homes fell by 850,000.
Demand for apartments means pressure on prices, with data from 36 Metropolitan Statistical Areas (MSAs) showing that rents are growing above their long-term average rate at 5.2pc currently, versus 3pc.
The rent component of the Consumer Price Index is at 3.8pc year-on-year, a level not seen since 2008.
The surge means rental expenses now comprise 20.8pc of median family income.
While the following is likely to provide little comfort to Americans struggling to pay the rent, Morgan Stanley finds that specific rent inflation is linked to macroeconomic trends including employment growth, income, jobs supply, and vacancies.
Among those variables, jobs growth is by far the strongest link with a correlation coefficient of 0.75 compared to 0.60 for jobs supply, 0.57 for vacancy rates, and 0.56 for income growth.
On that basis, renters in Dallas, Austin, Orlando, Richmond, and Phoenix - the five MSAs showing the strongest jobs growth - might be first in line for an unwelcome visit from their landlords.
Morgan Stanley's findings on the growing demand for apartment rentals would appear to stand in contrast to a recent report issued by research firm, Reiss Inc.
According to it, the second quarter was the fifth straight in which construction exceeded net gains in occupancy. (Bloomberg)