Is there a new U.S. rental bubble?

New York /
Mar.March 12, 2012 01:00 PM

Rent prices increased 3 percent nationally year-over-year in January, CNBC reported based on a not-yet-released rental index from Zillow.com, suggesting a possible rental bubble.

CNBC noted that increased rents have yielded a decrease in home prices for buyers: a 4.6 percent year-over-year decline, but with no set reason for why this is. According to CNBC, when rents increase, renters generally turn to home purchases.

In Chicago, rents rose 9 percent year-over-year and home values decreased slightly over 10 percent annually. Both San Francisco and Detroit saw rent climbs of 5 percent and home value decreases of almost the same percentage between January 2011 and January 2012.

CNBC asked if there is a tipping point, given the current state of mortgages, employment, and consumer confidence.

According to Stan Humphires, chief economist at Zillow, “While it would seem that rents are rising at the expense of home values, the opposite is true,” he told CNBC. “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.” [CNBC] 


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