Rental Demand Supports Property Values

June 19, 2012 3:07 PM EDT
Today Freddie Mac released its U.S. Economic and Housing Market Outlook for June showing that rental market activity has been a bright spot for the housing market, and due to rental demand by those postponing home ownership, further increases are expected in the coming year.

Over the year ending March 2012, an additional 1.5 million households moved into rental housing, a 4 percent increase in a single year. Rental vacancy rates have dropped roughly 2 percentage points over the past two years, while nominal rents rose (2 to 4 percent) during the year ending March 2012.

Starts of buildings with at least five apartments have jumped 48 percent in the first five months of this year when compared to the same period a year ago.

Frank Nothaft, vice president and chief economist at Freddie Mac said "Further increases in rental demand are likely in the coming year as newly formed households postpone homeownership decisions until the economy strengthens and they have accumulated sufficient savings. Overall apartment market trends may show further vacancy declines and rent gains, with property values improving as well."

Investors interested in this sector should consider looking at Vanguard's REIT ETF (NYSE: VNQ).

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