Rents Rising in Secondary Markets

There is little argument that this real estate market that’s developed since the crash is very different than any other multi-year period in our history. There’s news this week that the housing market is stagnant when it comes to sales. This is a turn-around from previous markets in that prices are also rising; not the norm in a stagnant market. Much of this is due to low inventory and demand from investors, but it’s still notable that people aren’t buying, so they must be renting.
Another turn-around is in the works for rental demand and rising rents as well. In the past, most of the news about rising rental demand and rents has been in major cities, notably New York. This is not the case in recent months. New York City is only projected to enjoy 4 percent rent growth this year. While 4 percent is OK, rental demand is making its way into the secondary markets, and a lot of it is spurred by technology and energy activity.
Cities enjoying new attention from apartment investors and builders include Seattle, and everywhere around the San Francisco Bay area, mostly related to the technology industry. Houston, Texas is another fast-growing city getting in on the apartment construction boom. Instead of the top markets of the past in New York City, Los Angeles, Boston and Chicago, some of the new hot markets enjoying around 6 percent rent price growth in 2014 are:
• Denver, CO
• Dallas, Houston and Austin, Texas
• Nashville, TN
• Southwest Florida coast
• Portland, OR
• Atlanta, GA
Don’t be depressed if you’re not in one of these cities, as this is a trend related to the economy and job growth as much as anything else. If you’re in an area that’s faring well in today’s job market, then you’re likely to see population growth and rental demand to accommodate it. Also, where apartments go, single family rental homes follow. Investors in rental property should enjoy a steady growth in demand for good single family rental property in these areas as well.