Economic uncertainty and a growing number of people losing their homes to foreclosure in 2010 drove rents up as prices of for-sale homes dropped, according to a report by property search site HotPads.com.
Rent prices nationwide rose 11.6 percent in 2010, from an average of $1,181 in January to $1,319 in December, the report said.
"With the U.S. unemployment rate over 9 percent throughout 2010 (up from 4 percent in 2006), low-risk housing options became more desirable, a trend that may continue in the coming months," the report said.
"At the same time, HotPads expects to see foreclosed and longstanding for-sale properties re-enter the market as rentals, which should expand the rental supply, thereby helping ease rent prices. This represents an interesting contrast to the peak of the housing market in 2006, when rental units were being converted into for-sale condos."
During the same period, for-sale home prices fell 9.8 percent.
The report is based on a sample of 1 million rental prices active on HotPads in 2010. HotPads weighted the monthly median rental prices for each state by the number of listings in that state. The site derived the for-sale price data from a sample of 3.9 million homes for sale on HotPads over the course of 2010.
The jump in rents and concurrent drop in home prices tipped the site’s rent-buy ratio in favor of buying, from 15.66 to 12.64. When the ratio is above 15, it generally makes more financial sense to rent a comparable home than it does to buy, the site said.
In January 2010, four states (Illinois, Michigan, New York, Ohio) and Washington, D.C., had ratios of 15 and under, in favor of buying. By December 2010, that list had tripled to 15, adding Pennsylvania, Virginia, West Virginia, Nevada, Minnesota, Maryland, Massachusetts, Georgia, Florida and Arizona.
Median rents rose the most in Florida between January and December of last year, up 17 percent. At the same time, median for-sale home prices in the state fell 14.3 percent, dropping Florida’s rent-buy ratio to 12 from 16.
Median rents in Washington, D.C., West Virginia, Massachusetts and Hawaii also rose by double digits in 2010.
Eight states saw their median rents drop: Kansas, Louisiana, Michigan, Minnesota, Montana, Nevada, South Dakota and Wyoming. South Dakota saw the sharpest drop, down 9 percent.
Median asking prices fell across the board. Arizona experienced the biggest decrease, 18 percent, followed by California, down 17.8 percent.
Other states to see double-digit declines were Illinois (-16.3 percent), Massachusetts (-14.3 percent), Colorado (-14 percent), Utah (-13.9 percent), South Carolina (-12.2 percent), North Dakota (-11.8 percent), Michigan (-11.5 percent), Georgia (-11.1 percent), Rhode Island (-11.1 percent), Minnesota (-11 percent), and Washington (-10.8 percent).
Colorado saw the biggest rent-buy ratio drop, to 21 from 26.
Ratios rose by one point in three states: Montana (to 26), South Dakota (19) and Wyoming (23). Ratios remained flat in Kansas (16) and Kentucky (17).