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The U.S Real Estate has been on a steady recovery after the global financial crisis. According to the Global Property Guide (2012), the recovery has been evident with the rising house prices, increased construction activities, increased demand leading to increase in sales and a fall in foreclosures. However, rental yields in New York have been moderate but very promising. Compared to other countries, the US Real Estate market is inexpensive. A growing population, due to increased immigrants annually, is the key reason behind the low house prices in major cities in the US.
Carmiel (2012), reporting in the Bloomberg stated that the apartment vacancy rates in New York had risen to the highest level in August 2012. In the Manhattan area, the vacancy rate was at 1.9 percent. This showed an increase in the number of leases signed between tenants and landlords. However, the average rental rates had risen to record highs while showing no signs of coming down in the near future (Karas, 2012). As a result, only less than 5 percent of landlords were willing to give incentives to tenants for instance a free month’s rent or payment of a broker’s fees. Thus, despite the high demand, rental prices were going up while incentives were dwindling (Jonas, 2012). Furthermore, the existence of stricter standards for lending of mortgage plus weak confidence among consumers significantly contributed to limited home purchases. This increased competition for rentals hence keeping the lease rates on the rise. Additionally, the high vacancy rate is due to people delaying to move into new apartments on set dates in order to save money in case of increase in rental prices (Karas, 2012).
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