Analysts cite higher demand amid surge in home foreclosures

By Kimberly Blanton, Globe Staff  |  October 29, 2008

 

Rents in the Boston area spiked 4.2 percent over the past year, the biggest increase in seven years, while rising foreclosures and a slumping housing market pushed more people into apartment living.

Average monthly rent in the metropolitan area increased to $1,659 in the third quarter, from $1,592 a year earlier, according to a report from Reis Inc., a New York research firm that tracks rents for apartments in buildings with at least 40 units. Boston's increase exceeded the national rise of 3.5 percent, Reis said.

Rents are up because families who are losing their homes in foreclosures are driving up demand for apartments, housing analysts said. As demand rises, it becomes easier for landlords to raise the rent.

During the first nine months of this year, Massachusetts posted nearly 31,000 home sales, or 14 percent fewer sales than in the same period in 2007, according to Warren Group, which tracks the housing market. This has curtailed the flow of first-time homebuyers out of rental properties, which would otherwise create space for new renters and take the pressure off rents.

But some rents rise faster than others, depending on location and type of apartment.

The market is tighter in Boston than in the suburbs, where rents are not rising as quickly as in the luxury apartment buildings downtown, he said.

High-end apartment buildings are raising their rents more than, say, owners of two- or three-family units in and around Boston, Donahue said.