As Home Prices Cool, Rents Are Heating Up

Just when you figured that putting off buying a house was a prudent move, the price of renting is going up.

After years of slack demand and "one month free!" incentives from many landlords, apartment rental markets are tightening in many parts of the country, especially areas like Los Angeles, Miami, and Washington, D.C., where home sales have begun to slow amid increasing mortgage rates and talk of a housing bubble. Rents are expected to increase nationally by 5.3 percent this year, about twice what they did last year, according to the National Association of Realtors. And they're growing even faster in places like Fort Lauderdale, Fla.; San Jose, Calif.; and the Washington suburbs of Maryland, where luxury apartment rents increased by 11 percent last year.

Real-estate experts credit a strong economy, low unemployment, and sky-high home prices that have boxed out many would-be buyers. That's not to mention those who have decided to put off a purchase until the market cools off. "A year ago, people may have expected some upside in house prices, but now they're not so sure," says Sam Chandan, chief economist with REIS Inc., which tracks the national real-estate market. "So people are less willing to pay a premium to be a homeowner and more willing to rent." MORE