The demand for rental housing units is growing. The average vacancy rate for apartment rentals is expected to dip to about 5.7 percent during the last quarter of this year, according to projections from the National Association of Realtors. Thats down from 6.2 percent during the same period last year.

One reason for the increased demand is the large number of individuals and families who are in a wait-and-see mode about buying a home. They want to see if prices will come down in the near future. Another reason is the increasing number of consumers who simply cant afford to purchase a home at todays prices and those prices continue to slowly rise. Consumers who are in a position to buy but are waiting to purchase a home may find that to be an expensive decision. The increasing demand for rental units will inevitably result in higher rents. NAR expects rents will rise an average of 4.1 percent this year, compared to a 2.9 percent increase last year. And of course those mortgage interest rates are expected to slowly rise at least through this year.

Builders and developers are licking their chops in anticipation of the growing market for residential rental properties. A new study conducted by the National Association of Home Builders indicates there will be substantially rising occupancy rates, rising rents, and increased traffic at all classes of rental apartments over the next six months. Thousands of rental units have been converted to for-sale units to meet what seemed an insatiable appetite for condos, said David Seiders, NAHB chief economist. As a result, the supply of rental units is very tight at a time when the demand pendulum is swinging back to rentals.
Both luxury apartments and lower-priced units reached their highest levels of demand on record during the second quarter of this year, according to a NAHB report. At the same time, the supply of available units is declining, and this trend will probably continue until an increased number of new units reach the market. Also, rents reached a record high level during the second quarter.