Back HomeWhy Does My Rent Keep Increasing?
August 15th, 2015 by keithandkinsey
If you are a renter, you may have notice the cost of your rent keeps creeping up. According to rentjungle.com, the average price of a 2 bedroom apartment in the Madison area is currently $1140 per month, and 5 years ago it was $929 per month. This is an increase of almost 23% over 5 years. The rental price increase is partly due to inflation which was about 8.5% over the same timeframe. However, most of the increase is due to good old economic supply and demand. We went for a several years during the real estate downturn with almost no multifamily construction. This resulted in rental vacancy rates for the first half of 2015 averaging 2.9% in Madison. Renters are having a difficult time finding affordable rentals and property managers having no problem filling rentals or raising rates. Thankfully for renters there are several large apartment construction projects in the area which are starting to increase availability. Although, much of the new apartment inventory will be higher end apartments. So, it’s a possibility that rent prices will continue their upward trend.
Renters may want to consider buying a home if they are settling in one location for a few years. Buying a home is a great way to lock in your future housing costs and prevent paying that annual rent increase. Your property tax will still increase as a homeowner, but if you do a fixed rate mortgage, your principal and interest payments will never change. It’s also a great time for real estate investors to ride the rental market up, and increase their cashflow as rent prices increase.
