The most recent Zillow Rent Index shows that rents in the U.S. continue to climb while home values decline. Rents rose in 68% of the metropolitan areas surveyed by Zillow by an average of 2% for the year ending in February. Analysts say foreclosures are a big part of the country’s struggling real estate market due to a large backlog and low resale prices. Meanwhile, continued unemployment troubles make it difficult for people to enter (or stay in) the housing market, forcing them to join a growing rental pool that is helping push prices for rents up. For more on this continue reading the following article from Property Wire.
February 2011 to February 2012, but home values continued to fall, declining 4.5% during that period, according to the latest Zillow Real Estate Market Reports.
The Zillow Rent Index showed year on year gains of nearly 68% of metropolitan areas but only 8% of metro areas saw home values rise.
The firm said that the rental market remains strong, especially in areas that continue to experience consistent home value declines. Chicago metro rents, for example, increased 8.6% over the past year in comparison to an 11% fall in home values over the same period. In the Philadelphia metro, rents are up 14.8% annually while home values have fallen 5.4% year on year.
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Foreclosures continue to be a key driver in keeping home values down, said Zillow. Foreclosure re-sales made up 20.3% of all sales in February, slightly higher than their previous peak of 20.2% of all sales in March 2011. Foreclosure re-sales made up 19.1% of all sales in February 2011.
Foreclosure re-sales are strongly affected by seasonality, and January and February are typically months with high percentages of foreclosure re-sales.
‘We have made it through the worst of the housing recession with a bottom on the horizon, but the deep backlog of foreclosures, elevated negative equity and high unemployment are all still obstacles on the road to recovery,’ said Zillow senior economist Svenja Gudell.
‘The rental market remains a bright spot in the housing market, where many markets, especially hard hit ones, are experiencing significant annual rent appreciation and drawing the attention of investors. Converting distressed and vacant properties into rental units will reduce the oversupply of homes and speed up the recovery process,’ Gudell added.
In the short term, national monthly rents declined slightly from January to February, falling 0.5% to $1,212. Home values fell 0.5% during the same period to $145,400.
This article was republished with permission from Property Wire.