24/7 Wall St.: Yesterday, online real estate site Trulia released rental data for the 100 largest housing markets in the country. The report showed that while home prices have increased slightly in the past year, rent prices have increased more than 5% in the 12 months ending April 31, 2012.
In six of the 100 markets, asking rent has increased by 10% or more. 24/7 Wall St. examined these six cities, which are located all over the country, to determine why rents have increased so much there.
24/7 Wall St. spoke to Trulia’s chief economist, Jed Kolko, who gave several possible explanations for the rents’ increases. First, he said, housing prices in many of these areas did not drop much during the recession, making them less attractive to buyers.
As evidence, home prices in four of these cities fell less than the average for the 100 cities. In Indianapolis, housing prices declined just 6.6% from their peak, the second-smallest decline in the United States. Instead of buying homes, Kolko explained, people moving into these areas have chosen to rent, pushing rental prices higher.
According to Kolko, the second major factor leading to increased rents in these areas is an influx of new employment to the region. Many of these areas have experienced major growth in their job markets. When new workers move to a region, they are likely to seek rental properties over permanent residences until they know how stable their new jobs are.
This is especially the case following a recession, when new employees are not confident in their job security. “If you get a new job, it’s not like you go out the next day and buy a house,” he said. “You want to make sure that job is stable — that you’ve saved up for a down payment — before you decide to make that home purchase.”
Of the six cities on our list, four had employment growth in the past year above the average of the 100 markets. Three were in the top 16 for job growth. In the San Francisco region, where rental prices increased 11.1% in the past 12 months, the number of employed people rose nearly 3% in the past year.
24/7 Wall St. obtained asking home price and rent values for the 100 largest real estate markets from Trulia for the 12 months ending April 31. Trulia also provided us with declines in home value in these areas from their prerecession peaks, as well as change in employment in the past year. Also, when applicable, we examined prices and change in inventory for homes, for these markets, as provided by Realtor.com.
Here are the six cities where rent is skyrocketing: