Inflation Alert: Soaring Apartment Rents

Trulia reported this week that apartment rents nationwide are up nearly 6% in the last year.

Buried in the last paragraph of a Bloomberg story about the cooling housing market are details about inflation in the rental market.  Three large California cities have seen ten percent hikes in housing costs in the last twelve months with San Francisco leading the way.

According to Trulia the median two-bedroom in San Francisco costs $3,550 per month.  Rental costs city wide rose over 15% since last year.

 

Money Sloshing Around the Real Estate Market

For five year tenants of commercial real estate in the U.S. could thank the Federal Reserve and their loose monetary policy as a driving force behind rising rents.  In addition to the massive increase in U.S. dollar supply renters now have a second force to be aware of, foreign investment.

From Bloomberg:

Chinese developers are on an expansive shopping spree in the U.S. Completed commercial real estate transactions by Chinese investors in the six biggest metropolitan areas totaled almost $3 billion in 2013, up from $335.3 million the previous year, according to New York-based Real Capital.

Keep in mind that the sellers of these properties have seen a nice fat profit in large part to low-interest loans received from banks since the 2008 financial crisis.  Leverage can work wonders if your bet pays off.