Home buyers are not the only ones hurt by rising mortgage rates. The jump in prices is also transforming the rental market into Twin Cities.
During the first three months of this year, the average metro vacancy rate fell nearly a full percentage point to 3.6%, according to a quarterly report by Marquette Advisors. When empty units in new buildings still being rented are taken into account, the vacancy rate was still only 4.4%.
Mortgage interest rates began to rise earlier this year, reducing the availability of housing in twin cities, especially for lower-income buyers. Freddie Mac said Thursday that the average 30-year fixed-rate mortgage has risen to 5.27%, the most since 2009 and more than two percentage points compared to last year.
“This is definitely not good news for renters,” said Sue Speakman-Gomez, president of the nonprofit organization HousingLink, based in Twin Cities. “It keeps people in the rental market. If you don’t have people renting home ownership, there’s not that much room in the rental market to accommodate everyone.”
With fewer vacant apartments to fill, property managers were able to increase rents slightly. The average rent in the subway was $ 1,382, an increase of 2.1% over the previous quarter and 4.9% more than a year ago.
The suburbs recorded the largest increase in rents, with an annual increase of 5.4%, compared to 4.5% in Minneapolis and 2.6% in St. Louis. Paul.
A new HousingLink report found that while rents for one-bedroom apartments in Minneapolis fell slightly in March compared to last year, rents for three-bedroom apartments rose 5%.
These larger rented homes usually house families who stay in them much longer than people in smaller apartments, Speakman-Gomez said.
“It’s still very challenging for low- and moderate-income households. We just don’t have enough housing,” she said. “People are still struggling to find a place that is affordable for their family.”
Although vacancy rates rose last year, especially in Minneapolis and St. Louis. Paul, that was far from enough to make up for the deep lack of lower-income rent, Speakman-Gomez said. She said a vacancy rate of about 7 per cent is needed to create enough space to alleviate the shortage of housing accessible to low- and moderate-income families.
The Marquette report found that the rental market tightened, especially in the suburbs, where the vacancy rate during the first quarter was only 3.1% compared to 4.5% in Minneapolis and 5.1% in St. Louis. Paul.
Minneapolis, where demand for rent has softened the most over the past year, has shown some of the strongest gains. The vacancy rate fell to 4.5% at the end of March from 6.8% at the same time last year. Paul saw only a very modest fall.
As higher mortgage rates make the cost of owning a home in twin cities more expensive, renting becomes a more cost-effective option for many. Brent Wittenberg, vice president of Marquette, said in a statement that a large number of elderly millennials and young families are now seeking higher rents, especially townhouses and single-family homes.
Marquette reported that the average vacancy rate in townhouses at the end of March was just 1.9 percent, down from 2.1 percent a year ago.