Rents keep rising as demand outstrips supply

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A new study indicates that the number of residents “cost-burdened” by housing has increased in Elgin and elsewhere in Kane County. | File~Sun-Times Media

Key apartment markets in Chicago and the suburbs, ranked by vacancies:

Average rent* Year-over-year % change

Suburban regions

Kane Co. $940 0.9 percent

McHenry Co. $869 -0.4 percent

Schaumburg/Hoffman Estates $935 2.3 percent

Aurora/Naperville $983 2.3 percent

O’Hare $823 2.9 percent

Wheeling $984 2.4 percent

Woodridge/Lisle $890 1.4 percent

Glendale Heights/Lombard $1,052 3.2 percent

Glenview/Evanston $989 1.4 percent

SW Cook Co. $767 1.1 percent

West Lake Co. $865 1.0 percent

East Lake Co. $915 0.6 percent

Joliet $747 1.0 percent

Oak Park $878 0.1 percent

Downers Grove $897 2.5 percent

City areas

Lincoln Park $1,142 0.9 percent

Belmont to Montrose $1,148 1.1 percent

Rogers Park/Uptown $768 2.3 percent

Gold Coast $1,595 2.9 percent

South Shore $851 0.8 percent

Loop $1,521 3.1 percent

City west $981 1.6 percent

SOURCE: Marcus & Millichap

Average rent after concessions

Article Extras

Updated: November 4, 2011 6:08PM

Hunting for an apartment? Be prepared for a long search and high rent.

New market studies show that the two-year trend of rent increases around Chicago and the suburbs will continue through this fall and could escalate into next year.

And though real estate agents agree that it’s difficult to pin down exactly how much the average Fox Valley apartment or rental home has increased — rents vary from neighborhood to neighborhood — they all agree that renting is getting pricier as more renters enter the market.

“My perception has been since the economy hasn’t gotten much better and mortgage financing is harder, it’s created a large pool of tenants. There’s just as many tenants as homes, or even more,” said Sean Morrissey, an agent with Keller Williams in St. Charles. “There has been probably as much as a 5 percent increase in rental prices over the past year.”

Rentals remain caught in the backdraft of for-sale housing. Industry watchers said foreclosures, falling home values and tighter standards for mortgage loans have forced prospective homebuyers to rent instead, causing vacancies to decline.

“I see a lot of cases of young couples in townhomes who, after foreclosure, moved back in with their parents to recoup their savings and their credit. It’s rare that you get an application where the credit is strong,” said Denny Malmgren, agent with Re/Max Town and Country in Aurora.

Of course, young couples can’t live with Mom and Dad forever; but when they venture out to rent again, they face fierce competition.

Few new apartments are being built in the region except for downtown Chicago. Many suburbs frown on rental buildings and use their zoning powers to ensure that multi-family buildings are condominiums.

“There are more renters in the market than we are finding homes, and for buyers it’s hard to qualify for mortgages,” said Erin Hill, agent at Coldwell Banker Honig-Bell of Aurora. “There are a lot of people who have lost their homes or gone through short sales who have to rent for a couple years before they can qualify for a mortgage again. That has increased demand, which has really inflated rental housing.”

Throughout the Chicago area, rents should rise 2.9 percent this year after an increase of 2.2 percent in 2010, said a report by the real estate brokerage firm Marcus & Millichap that is current through the second quarter.

Separate mid-year reports from Appraisal Research Counselors paint a similar picture. The firm said suburban apartments charge on average 5.2 percent more than a year ago and that the pattern should continue.

“Five, six, seven years ago, prospective tenants would negotiate rents,” said Malmgren, who said he’s been handling rentals for 40 years. “Now there’s less chance for that. The rents are going up.”

And while the time it takes from listing to move-in varies on factors such as how move-in ready it is, the average is down to 30 days or fewer.

So-called luxury rentals are starting to emerge in the suburbs in the form of large single-family homes in good school districts, where the owners have been forced out, often because of a job loss.

“I’d say the big increase is in the luxury home market, I mean, rentals of $2,500 a month or more,” said Morrissey. “Those also tend to be more flexible in terms because you don’t have the large rental market.”

He said such homes are often three bedrooms or more, suitable for families rather than singles.

The frenzied market for rentals may create headaches for potential tenants, but it has been good news for real estate agents.

“In fact, it’s the primary source of my business, supplemented by the occasional buyer and short sale,” said Morrissey. “While so many agents have gotten into foreclosures and short sales, there’s a lot of competition our there. I’ve sort of streamlined things to make it more efficient to handle rentals and property management.”

A rent-vs.-buy analysis of major cities by the online listings provider Trulia, using data from July, showed that in Chicago, it made slightly more financial sense to own a home than to rent one. Most other major cities showed up in the study with stronger “buy now” numbers.

But Fox Valley agents still advise that if you can buy, you should.

“In my opinion, anytime you’re renting when you do not have to, you’re losing money,” said Hill. “Now is still an excellent time to buy because there are amazing deals out there for purchasers. We’re at an all-time low in housing prices, which means that you can buy so much more home for your money than three or four years ago.”

Of course, if that’s not an option, there are a couple things renters can do to increase the odds of snagging their temporary dream home.

“It’s going to come down to income and credit scores,” said Morrissey. “Usually, what I look for is monthly rent that’s 30 to 40 percent of monthly income, and a credit score above 600. If you don’t have either of those, try to have two months of rent saved up for a security deposit. Most homeowners always agree to that.”

The Chicago Sun-Times contributed to this story.