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Surging rental income likely to slow

WASHINGTON – Sept. 22, 2015 – It’s a good time to be an investor in a rental property. Total rental income – rents collected from tenants – climbed from $60 billion in 2007 to more than $130 billion today. But investors shouldn’t expect those soaring rental incomes to stick around for much longer, says Lawrence Yun, chief economist of the National Association of Realtors® (NAR).
Rental costs are rising quickly as rental vacancy rates drop to their lowest level in three decades. Investors of rental properties have been obtaining income from the rising rents, with net rental incomes more than doubling in the past decade.
Apartment construction activity is above historical norms, with multifamily housing starts at 400,000 on an annualized basis this year – the strongest pace in 30 years. Also, steady job growth is improving the credit scores of renters, which will help move them into a better position to buy a home.
Also, former homeowners – those who lost their homes to foreclosure during the housing crisis – may be renting now, but they’ve worked to repair their credit and are expected to make a big re-emergence into the housing market. About 1.5 million homeowners who went through a distressed property sale are expected to return to the housing market over the next five years.
As Yun points out, the supply of apartments is rising while the demand growth for rental homes likely will be softening in the coming months.
“Perhaps there is still room for rental income growth for maybe another year or two, but do expect a major rental housing and aggregate rental income slowdown in upcoming years,” Yun writes.
Source: “Soaring Rental Income Unlikely to Continue,” Forbes.com (Sept. 4 2015)
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Source: Florida Realtors Feed

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