Rents are rising again across the country, squeezing tenants who are already coping with high gasoline prices and improving returns to landlords after a deep five-year slump.
The turnaround appears to be another sign that the boom in house prices and sales is finally slowing, as homes have become so expensive in many metropolitan areas that some people have decided to rent instead.
A government report yesterday also offered new evidence that the housing boom could be reaching a peak. The median price of a newly built home fell to $203,800 in July from $219,500 in June, after having risen in the winter and spring, the Commerce Department said.
Still, the number of new homes that were sold continued to grow, and economists cautioned that the recent housing slowdown could turn out to be a pause.
But rents have clearly changed direction, even if the increases have been relatively small. With the economy growing and mortgage rates inching up, more people are looking to rent apartments and homes rather than buy them. At the same time, many buildings are being turned into condominiums, reducing the supply of rental property.
"It seems like the tide has finally turned," said Michael H. Zaransky, co-chief executive of Prime Property Investors, which owns 15 buildings in Chicago.
Rents in about 85 percent of large metropolitan areas have climbed in the last year, according to Global Real Analytics, a research company in San Francisco. Late in 2003, rents were falling in 85 percent of markets.
Only in the hottest markets like New York, Southern California and South Florida have average rents been rising generally.
In Chicago, people who moved into a small brick building on the leafy corner of Sherwin Avenue and Paulina Street two years ago had it very good. They did not have to put down a security deposit, the $50 application fee was waived and, best of all, they got to live rent-free for two months.
By last summer, the enticements had shrunk to one month of free rent. Today, all that a new tenant receives for signing an $1,100-a-month lease are the keys to the front door.
Throughout the South, in cities like Atlanta and Charlotte, N.C., fewer apartments are empty, building managers say. Nationwide, the vacancy rate for rentals fell to 9.8 percent in the second quarter after having climbed early in 2004 to 10.4 percent, the highest level since the Census Bureau began keeping statistics in 1956.
Even in Northern California - where average rents dropped about 25 percent after the dot-com crash, according to RealFacts, a research firm there - prices have reversed direction. "I'm appalled at the rents and what they are asking in relation to what they are giving," said Shari West, 47, who lives with her 13-year-old daughter and has been looking for a two-bedroom house in Castro Valley, about 25 miles east of San Francisco. "You're not getting what you pay for."
The apartments she has seen cost almost $1,800 a month, about $100 or $200 more than they did when she briefly looked last summer, she recalled. The buildings still offering concessions, like a month's free rent or a reduced security deposit, are in neighborhoods where Ms. West said she did not want to live.
In most places, the rent increases have been smaller than the ones Ms. West found - smaller in fact than inflation in the rest of the economy. The average rent nationwide rose 2.5 percent from the spring of 2004 to this spring. It had fallen 4.5 percent from 2001 to 2003, according to Global Real Analytics.
Outside the San Francisco Bay Area, many of the biggest declines occurred in cities like Dallas, Denver and Memphis, where abundant land and light regulation allowed home builders to put up thousands of new houses. Rents have continued to drop in those cities over the last year. But they have begun rising in metropolitan areas including Seattle, Las Vegas, Phoenix, Kansas City, Cleveland, Philadelphia and Washington.
"It seems to us that the market bottomed last year," said V. James Marfuggi, chief operating officer of EPT Management in El Paso, which owns 70 properties around the country. "This will be the first year that concessions have not increased."