A nation still struggling to clear up one housing debacle has run smack into another -- soaring rents.
The foreclosure mess has pushed millions of former homeowners with tarnished credit into a competitive apartment market across the U.S. Add fresh demand from young workers, few new units and tight standards for home loans, and the result is rental sticker shock not seen in years.
Rents are surging from New York to Los Angeles. The average monthly U.S. rent for apartments hit $1,008 in the first quarter, pushing past the all-time high set in the third quarter of 2008, according to the data firm RealFacts. In certain markets, it is now cheaper to own a home than rent.
Menachem Krinsky, of Los Angeles, recalls how in late 2008 every street seemed ornamented with "for rent" signs when he moved to Los Angeles from the East Coast. Back then, his landlord was so desperate to keep him as a tenant that he slashed his rent of about $2,000 by $800 after Krinsky's first roommate bailed on the lease.
These days, however, Krinsky's search for a one-bedroom apartment costing around $1,500 is shaping up to be a major headache.
"I am looking for something clean and new, and unless you want to spend a fortune, it's hard," said Krinsky, a 22-year-old art director and graphic designer.
Rob Magnotta, a real estate agent, recently listed his two-bedroom Irvine, Calif., condominium for rent on Craigslist for $2,300. He had six applicants within 24 hours, including one who wrote a poignant letter about losing a home to foreclosure.
"It was almost too easy," said Magnotta, who chose another renter. "I know the rental market was strong. But until you are actually renting the place, I think you are surprised it is that strong."
A big driver of rent increases has been demand from young workers who are striking out on their own after doubling up with family members during the worst of the economic downturn.
Alaia Williams, 27, recently moved out of her mother's Inglewood apartment to be nearer to her job at a Santa Monica, Calif., tech start-up. She and a roommate are splitting the $1,400 rent on a two-bedroom apartment in Los Angeles' Palms neighborhood.
"We can't afford to live" closer to work, she said.
People who have lost their homes to foreclosure or short sales are also feeling the sting. Damaged credit means many must pay a premium or put down a bigger deposit to secure a place.
Robert Corlette pays about $1,700 a month for a two-bedroom townhouse in Anaheim Hills, Calif., that he shares with his wife and five children. The family lost their home to foreclosure in 2009 after Corlette lost his $75,000-a-year job selling insurance. His current job, also in the insurance industry, pays about half that.
"There is a lot of pressure," said Corlette, 56. "It wears you down."
The crash has made owning a home more affordable than renting in some markets. An index by the research firm Green Street Advisors compares buying with renting in 79 metro markets; that index hit its most attractive point last year for buying since 1991, when the firm began tracking the data. Researchers calculate that the after-tax cost of a mortgage is only 10 percent higher than what it costs to rent nationally after taking into account mortgage rates, property taxes and other factors.
Rising rents have converted some renters into buyers. Scott Matulis, 48, recently purchased a townhome in Oak Park, Calif., after enduring two consecutive years of rental increases. His mortgage, taxes and homeowner association fees now total $2,200, just $100 more than what he was paying his former landlord.
Surging rents may be motivating home purchases by people who are in good shape financially, but those increases are walloping working-class families and the poor -- groups already hard hit by job losses, lost income and stagnant wages.
Marisela Alfaro has lived in the same one-bedroom Santa Ana, Calif., apartment for 28 years. A large bed sits in her living room, where she and her husband sleep; their teenage daughters share the bedroom.
"It's been difficult," she said.