Boston rents keep rising

It is interesting that the rise would be so small, about in line with inflation. Plus, some of that increase is due to much higher fuel and electric costs, which are passed along to the renter when utilities are included in the rent.

With sales down well over 20%, the question is, where are all the non-buyers living? Maybe people who can't or won't sell for what the market will pay them today are renting out their homes, increasing the supply of rental properties. Perhaps there was, in the past, speculative buying, and that has slowed (or stopped).

I agree with the first poster, looking at your data, the headline should be "Boston rents nearly flat over last several years". Is this data normalized for inflation? Given the shart rise in food and fuel costs, I wonder if the real story is being missed here. These rental prices may be flatter than expected due to a net increase in the number of rental properties. There may be more rentals due to sellers not accepting the current market pricing and thus choosing to rent their properties. A lot of sellers seem to be waiting mythical "turnaround" back to bubble pricing conditions when easy credit, liar loans and speculation were driving up prices (05-06 peak).

Renting a house you want to sell in the future is a tricky endeavor.
Bottom line, tenants do damage so you'll need to repair per-sale.
Also, most homeowners are not landlords...and tenant/landlord
issues become legal matters very quickly. Do not rent if really
want to sell. A lower price might be a far better deal than landlord
issues.

Agreed, Gus. This small rise actually implies that simple inflation is the driving force behind an increase in rents -- not more demand, as the article's author speculates, and less supply, as is implied. Even if there is more demand, there is no net change in the number of housing units available. Regardless of whether housing is owned or it is rented, it is still available.

A lot of first time home buyers are leaving the area for cheaper locations. The whole "mass exodus" thing...

Wait until all the NEW units being built that aren't being sold (there is a MASSIVE supply) start going rental....then prices are in for a HUGE drop in terms of rent!

I remember when rents were rising $100 per year -- the rate of increase is 1/4 that now. I'm really surprised how much people are willing to pay for the second bathroom, though.

Yup, the rise is little more than what you would see due to the change in CPI. Of course that is using the governments bogus CPI numbers. As most people are well aware, price increases over the last few years have been much greater than the 2 to 3% that government keeps telling us. Using the pre-Clinton methodology for calculating inflation (as covered at shadowstat.com), the real change in CPI has been on the order of 5 to 10% plus over the last few years. So in real terms, rental prices have fallen.

And the title of this article would imply that the lines in the graph should have a positive upslope throughout the entire data set range. That is not the case. So rents have not kept rising. They rose, then they fell, then they rose, then they fell.......

I wonder how credible this report is. I went to the rentometer's website and I can't find any mention of their data sources. Comparing some rents in Seatle, I simply see some flags on a map with numbers. No source, no date, no nohthing.

Also, to make it representative, how many samples were used each year? Having 100 properties for example in Boston in 2006 and declaring that was the Median rent is far from being accurate.

With prices down and interest rates low, renters have to ask themselves whether it makes sense to continue paying a landlord or buying a home of their own.

Ginnie Mae has a useful "buying v. renting" calculator to consider all the costs.

I have been look at new apartments and have been noticing a few things.

It is harder for college students to get loans. In Boston college students increase demand for rentals. It looks like this is related to the housing downturn. Bank can not repackage the loans. The loans backed by the gov. are not as affected. An example is that Bank of America just announced they will only be handling gov backed loans for students.

Colleges like BU have increased the amount of on campus housing for their undergrads. They also have more housing going up for the next few years. This will take renters out of the general rental market. Part of this is because of local pressure to get the undergraduates out of the general rental market. Folks in these local markets do not want to live next to partying 19 year olds. Some collages are aiming to house over 90% of their undergrads.

Rental agents have help wanted signs up. One would normally think this means there is a large demand for rental properties. I do not think that is the case. From what I understand most agents are 100% commission. If they do not rent places they do not eat. It looks like there is a large turnover of agents not net new highers.

Good luck finding a 2 bedroom in a decent neighborhood for $1600. Actually, good luck finding a place to rent at all. Rental agents swamp listings with "teaser listings" and wear you down by showing you crappy apartment after crappy apartment in the hope that you will finally just take one they couldn't foist onto anyone else. The faster rental listings make it on to some sort of MLS service, the better, then perhaps rental agents could actually be rental agents instead of sales reps for hire.

I agree with Michael, the 2bed/1ba vs 2bed/2ba is totally off the common sense. That looks more like 3bed rents. I don't think anybody will shell out 40% more in rent for an extra bath vs. an extra bedroom!

I personally like the real-time heatmaps that Zilpy puts out. I like to keep an eye on the market trends so often as the rental market in Richmond, VA is so dynamic this year.

The extra bathroom thing makes some sense to me - my gf and I only need one bedroom, but we'd pay extra for a second bathroom.

And for Rich, good point, its good for people to calculate the cost of renting vs. the cost of ownership.

Doing that shows that renting is amazingly cheaper than owning still, which is why I still rent.

Several of you have noted the cost increment associated with a second bathroom in a two-bedroom apartment, which I also find very interesting.

By way of partial explanation, it's worth noting that the difference isn't just a matter of stapling an extra bathroom onto the standard 2BD/1BA.

Sunrise reports the average size of a 2BD/1BA is about 900 square feet, while the average size of a 2BD/2BA is about 1,110 square feet.

To me, that suggests apartments with second bathrooms tend to be larger in other ways, too, which contributes to the cost differential.

Mitch-

The problem is that the listings don't take square footage or amenities into account. I'm sure that no one pays 40% just for the bathroom. But a 2bd with a second bathroom probably also has significantly more square footage and other perks.

And let me applaud AHG's little rant. The rental marketplace is completely broken. Caigslist is flooded with false and misleading advertisements. There's no disclosure of ties between rental agents and landlords. Renters often pay the fees, but it's clear that many agents value their longterm ties to the landlords more than the renters' interests. I had one agent tell me bluntly that he wouldn't show me leaded apartments, whatever the law might say, because if he put a tenant with a child in an apartment that would have to be deleaded, he'd never get another listing.

It actually makes me appreciate REALTORS and other sales agents - at least they have a degree of self-policing for some of the more egregious offenders, and pay lip-service to professional ethics. They also have a central register of information (MLS) that keeps things somewhat honest. It often seems as if landlords actively want their rental agents scuzzy. When a lease is signed based on fraudulent representations, the potential costs are low - it's almost never worth it for the tenant to sue or take other legal action, far easier to break the lease. And most tenants will simply grimace and endure it until the lease expires. The rental agencies themselves cycle through agents, and generate little repeat business, so reputation matters little to them. The agents are working on commission, and so all they want is for a renter to sign a lease as quickly as possible. Since their commissions are so much smaller than those of sales agents, and they only get a cut after the agency takes a big chunk, they have relatively little investment in each client. It's a system that's thoroughly broken.

The growth of the for-rent-by-owner section of Craigslist is one sign of the market's disfunction - most landlords in Boston wouldn't even have to pay a rental agent to take their listing and do all the work for them, but many would rather arrange the rental themselves than deal with agents. And who can blame them?

Binyamin,

To add to that, I'd have the strong suspicion that 2bd/2ba in boston also tend to be newer or renovated units in Boston - in older boston units it was often thought that one bathroom was all anyone needed. New units almost always have 2 for a 2 bedroom.

So the second bath probably correlates with a number of other things that raise the price - size, age of construction, and extrapolating from that, granite countertops in the kitchen and stainless steel appliances.

Statistical patterns and correlation is truly fascinating stuff.

I agree with James - there are no references anywhere on their site as to where the rental data is coming from. If the data is good, why not show the source? After searching around, I found a few blogs stating that rentometer uses their user search data as sources. If that is case it can't be trusted at all.

James and Adam,

Thanks for your comments. I should have included a little more background about Rentometer in my initial post. The company says its data comes from three sources: An aggregation of rental listing data from third parties; information from landlords who use its online tools for listing properties and managing tenant relationships; and self-reported data from tenants using Rentometer.

While the company's exact methodology is proprietary -- and while I share your basic impulse toward caution about data from new sources -- Rentometer's figures track closely with reported data from other aggregators, such as Sunrise and Zilpy, and therefore I see no reason to devalue it completely.

What's pretty amazing about the renting v. buying calculator (see post 10) is what a huge difference your interest rate makes.

Run a calculation using 6.75 percent and then 6 percent.

For those people waiting for prices to drop another 2 or 3 percent, they may end up worse off if interest rates are at 7 percent.

Another thing to keep in mind is that if you go from renting a 2 bedroom, 1 bathroom apartment to living in a 3 bedroom, 2 bathroom house with a yard, your costs should be more. There is no comparison. You have to compare apples to apples for it to make sense.

Binyamin,

You might be right, rentometer's data might be valid and accurate, however if that is the case I can't think of a single reason why they would not want to give credit back to the data sources they use (3rd party) and that makes me uncomfortable using them as a reference.