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Posted on Tue, May 15, 2012 : 4:50 p.m.

Housing market: High demand for rental properties will lead recovery, report says

By Lizzy Alfs

Rental properties and smaller homes are replacing the "McMansions" of decades past, the Wall Street Journal reports.

The report, citing a study released by the Demand Institute division of the U.S. Conference Board, says the U.S. housing market recovery is being led by high rental demand, with more than 50 percent of those planning to move in the next 2 years saying they intend to rent.

Nationally, rental vacancy rates have dropped from 9.7 percent in 2011 to 8.8 percent in the first quarter of 2012. At the same time, rental prices have increased, with the median asking rate now $721, compared to $694 in 2011.

Young adults and new immigrants are driving that rental demand, according to the report. At the same time, there is a rebound in new construction driven by multifamily projects, especially in more urban areas.

The Ann Arbor rental market is particularly strong thanks in large part to University of Michigan students. With developers eyeing the potential for construction near downtown Ann Arbor, several high-rise student and young professional projects are under construction or proposed for the area.

A local builder also recently announced plans to construct a 5-unit townhouse-style building on Catherine Street near the University of Michigan medical campus.

But the report says homeownership is still a long-term goal for most people, citing a Pew Research survey that showed 80 percent of respondents still think buying a home is the best investment they can make.

When people do purchase or build a home, the average size will shrink to 2,150 square feet by 2015, compared to a “housing-boom high” of 2,500 square feet.

Read the full Wall Street Journal report here.

Lizzy Alfs is a business reporter for Reach her at 734-623-2584 or email her at Follow her on Twitter at


Mike Hulsebus

Wed, May 16, 2012 : 3:49 p.m.

A quick search on Padmapper with confirm that there isn't much to rent in Ann Arbor right now. Here, for example, is a search for all 2br apartments available in Ann Arbor for under $1000/month To those that say there are too many vacant apartments already, talk to someone trying to find an available apartment now and they'll fill you in. There seem to be a lot of people who got new jobs starting June 1st that have raised demand for Ann Arbor apartments earlier than is typical. Some apartments have waiting lists that are 50 or more people long for if apartments come up.


Wed, May 16, 2012 : 1:09 p.m.

I have a historical house on the west side I rent rooms out to students and have had a very difficult time filling this year! I have been posting since Feb and just now am getting some leases signed. I had to even lower rent below what I wanted on one room because of affordability. I really think these high rises has majorly affected my prices as well as how many people are inquiring which is not making me happy! I put a LOT of work into this house and it is beautiful! People see the value but can't afford what I need to have the rooms rented out for.......why do we need to build more rentals if we have people like me suffering?????

Laura J

Wed, May 16, 2012 : 1:42 p.m.

You had to lower your rents? Join the club. The economy was and still is in a recession. Not a reason to stop construction and capitalism. My kids see the value in their bedrooms, but they can't afford to pay what I need for the rooms either!!


Tue, May 15, 2012 : 10:14 p.m.

This is news? Landlords have been ripping off tenants for years in A2, and now the trend continues with ever more intensity thanks to the housing bust. "A local builder also recently announced plans to construct a 5-unit townhouse-style building on Catherine Street near the University of Michigan medical campus." Just what A2 needs, more ugly housing "development" near UM. Does it ever end?


Tue, May 15, 2012 : 9:26 p.m.

For once I'm ahead of the curve with my small house. Even a blind dog can find a bone.