It seems counterintuitive that with all of the doom and gloom we hear about regarding the economy in the media, and a high unemployment rate, that vacancy rates would be lower now than any time in over ten years. You can’t rent an apartment if you do not have a job or the ability to pay for it, right? The current market conditions in the Boston Area are reminiscent to me of when I started in the rental business in the late 1990’s. The competition for apartments was fierce; there was little availability, apartments rented very quickly, and the tenants would invariably pay the full broker fee. These conditions appear to be returning- with rents closing in on all-time highs.
A variety of factors could be behind the tight rental market and rising rents, including a resilient Boston area economy, a reluctance or inability of people to purchase homes, and an unfavorable supply/demand situation for those looking to rent. Boston is home to world renowned Education and Medical Institutions which are highly resistant to economic downturn. According to Governor Patrick, Massachusetts has a lower unemployment rate than 44 of 50 states. People are renting now in greater numbers by choice and some, out of necessity. With home values continuing to decrease, people have an incentive to rent and wait for even lower prices still, and despite record low mortgage rates, people are having difficulty coming up with down payments, and/or qualifying for mortgages due to more stringent loan standards.
These factors, in addition to an insufficient supply of new rental units coming on the market due to the availability and cost of land for building and a large influx of graduate students in the last ten years has resulted in the tight rental market that is showing no signs of letting up.