Intro: Katie Doyle and her family moved into their rented townhome three years ago. Like many families, the Doyles are saving up to buy a home. However, unlike some of their neighbors, the Doyles are paying a below market monthly rent.
(:28-:32) Katie & Matt Doyle
"When we moved in we paid about $1,600 and now our neighbors are paying about $2,000 a month."
Rental rates are rising across the country. The national average monthly apartment rent is expected to increase 3.8% this year ... and 4.0% in 2013 (Source: National Association of Realtors). The shift to renting can be attributed to economic and employment challenges of the last several years. Because fewer people have been buying, rental vacancies are declining ... and prices are going up.
The rental market is so hot that in some markets, like New York City, where the vacancy rate is just over 1% -- getting into a rental is reminiscent of the real estate feeding frenzy of years past.
Take SOT: Brian McFadden, Licensed Real Estate Salesperson at Citi Habitats in NYC
"In New York City, most places are going to require you to have paperwork ready on the time you want to apply for an apartment. From letters of employment, bank statements, tax returns ... often the kind of stuff in the rest of the U.S. where you need to just buy a house; here you need all that paperwork at the ready, just to rent."
The rental market is heating up to the point that investors are jumping into the landlord business because returns are high. According to an April 2012 Wall Street Journal article, a yearly yield on an investment rental property nationwide average about 6.3%, but can exceed 8% in cities where the housing crisis hit the hardest (Source: National Association of Realtors).
A possible jump-start to the housing market might just be high rents. Affordable home prices and record-low mortgage rates will cause many people to look towards a home purchase now that rents are outpacing the cost of ownership.
Take SOT: Katie, Matt & Lilly Doyle
"Yeah, like for example, this townhouse sold for $450,000 five years ago and now it's for sale for $225,000. Yeah, so it seems like the rents are going up and the home prices are coming down."
Take Mortgage Calculator screen shot: Considering taking the plunge into homeownership? Bankrate.com's "How much house can you afford" calculator will help you crunch the numbers and when you're ready for a mortgage, check out the free rate search engine at Bankrate.com. I'm Kristin Arnold.