Proving that more people are renting rather than going into homeownership, Zillow reports that rent prices went up 3% in 2011, while home values dropped 4.6%.
“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,” said chief economist for Zillow Dr. Stan Humphries in a release (via DSNews.com).
This could have something to do with the government's Real-Estate Owned (REO) pilot program, launched in August 2011, which put nearly 2,500 foreclosures up for sale in February 2012 to pre-qualified investors. The investors would then convert the properties into rental units, thus hopefully stabilizing neighborhoods and reducing the number of foreclosures on the market. Nearly all of those foreclosed homes that are part of the pilot program are located in Los Angeles.
With the Zillow Rent Index, we are now able to quantify exactly how the rental market is growing across the country.