There have been numerous stories recently about the tightening supply of rental housing in the Twin Cities. The latest story from Star Tribune details the struggles some renters have had in finding a place to rent and reveals to us that the apartment vacancy rate in the Twin Cities is now at an astoundingly low 2.4%.
The housing boom created strong demand for condo conversions, which ate up a lot of rental housing. Then the housing bust killed demand, financing and developer interest in building more apartments. Now we find ourselves in a tight supply market, which will definitely put added pressure on rent prices, which I suspect will rise further in the coming year.
The strong demand for apartments has also spilled over into rentals of single family homes as well. Craigslist is bustling with listings for rental homes and it seems that most of theses listings do not last long. Just under a year ago Twin Cities Realtors got into the rental game in a big way. In the first 11 months of operation, our local MLS”s rental section shows over 1300 units rented – with nearly all of them being houses, townhouses or condos. That represents just a tiny fraction of rental units in the Twin Cities but because of the detailed nature of MLS listings, we will soon have far better insight into the single family rental market than we’ve ever had before.
With the huge investor activity currently occurring in our housing market, I believe much of the current shortage of apartment units will be met by investors buying up properties (mostly foreclosures) and renting them out as apartment alternatives.