Rising Rents Can Help Falling Home Prices

March 16, 2012

As U.S. home values continue to fall, rental prices continue to rise, especially in the Chicago real estate market, which saw year-over-year rents rise almost as much as values fell.

Dice that says buy on one side and rent on other.The very first Zillow® Real Estate Market Report has been released to show that median U.S. rents rose 3 percent from January 2011 to January 2012 while home values fell 4.6 percent during the same time period.

In Chicago, median year-over-year rents rose 9.1 percent while home values fell 10.4 percent.

Rough, though not necessarily bad news.

“The flourishing rental market is the silver lining to the nation’s housing downturn,” said Zillow Chief Economist Dr. Stan Humphries. “While it seems that rents are rising at the expense of home values, the opposite is true.

“A thriving rental market will stimulate home sales as investors snap up low-priced inventory to convert to rentals. That, in turn, will lower the number of homes on the market, which will eventually help put a floor under the value of all homes. Moreover, rising rents increase demand as buying becomes more attractive than renting because of low purchase prices and higher rents.”

The Zillow report also showed that national monthly rents fell 0.3 percent from December 2011 to January 2012 while home values fell 0.5 percent. The average U.S. monthly rent in January was $1,218. In Chicago, it was $1,453.

“We haven’t had a good way to quantify what is happening with rental rates until now,” said Humphries, “and the inaugural Zillow Rent Index shows us a healthy and growing rental market across the majority of the country, even as home values continue to fall.”

To see the entire Zillow Rent Index report, click here.

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