Is the rental market going to decrease?
As you will recall in a previous article we touched on “why” the rental market is in such high demand and so high-priced right now. To recap we talked about the homes that became rentals in the downturn of the economy have been put up for sale since the real estate market has improved. That’s the reason why I believe there is a significant decrease in rentals and a huge increase in renters. Now the REAL question is…how long do we predict this is going to last and can we expect to see the rental market decrease in the coming months, years?
Without a crystal ball…I would have to say no, we are not going to see a change in the rental market for some time to come. Why? I have heard of many people “waiting” for the real estate market to drop to be able to buy. Based on the most recent recession, the current thought process of many investors/buyers of what will happen when the market declines is that there are going to see prices on homes as low as what they got to in 2008.
What is not being considered is that the reason for the significantly low-priced homes was the fact that the buyer could not refinance the homes at the value they needed. With the questionable adjustable rate loans everyone had been put in to during the white hot market, their payment was about to “adjust” therefore doubling and sometimes tripling without being able to refinance their loan. Therefore there were 6 million plus homes that were forced in to foreclosure during this recession. This became an ideal situation for the investors who could come in and buy homes that had sometimes had $350k-$400k owed on their loans for just $125k. As a result, this created a lot of rentals as these investors were not buying these homes to occupy but rather to rent out.
Why is this market different? The way I see it, this market is different because as the interest rates increase the price of the homes generally start to decrease and sellers are not going to be FORCED to sell their homes as they were in the last drop in the market. They don’t HAVE to sell and therefore, in my opinion, would hold on to their homes until the market recovered and they could get as much or more than what they paid. That is, after all, how real estate works the best for the owner.
With homes not being forced to sell but instead just “waiting it out”, I don’t believe there will be a decrease in rentals, per se, like we are seeing now, because SO MANY owners are selling their investment properties with the high market. I predict the current rentals to remain rentals, but the problem that arises is that with all the homes that are selling right now there is a HUGE increase in renters needing homes. However there are not enough rentals for the amount of people searching. If the way that I predict the market to go, it can do one of two things, both being favorable for the rental market.
- It can stay high and the prices of rentals will continue to stay high due to the demand vs. supply, or
- the real estate market will drop, may owners will not sell since they aren’t being forced to and we won’t have an increase in rentals, so therefore the prices remain high because our rental market is in the same state of need as it was when the market was high.
The bottom line is that there are not enough homes in our area to house the amount of people that live in our communities. Hence the overwhelmingly high numbers of homeless right now.
What can we do? If you are a renter and can entertain the option to buy (you are more than welcome to contact us and we can give you the parameters that lenders are looking for), then I would recommend buying. Stop paying someone else’s mortgage and start paying your own. With that, it will free up rentals that have been occupied and will decrease the amount of people looking for rentals. Although I don’t know how much it will help, it is one step in the rental housing crisis direction.
If you have been deciding whether or not to make your additional home an investment property, now is the time. Give us a call and we can help you make rental an amazing and very lucrative experience for you.
If you are a tenant and would like to buy, please feel free to contact us, we have great lenders we can put you in touch with who can walk you through the process of buying and we would be happy to help walk you through that transaction. Many people describe the buying process as very difficult, we at Divine Properties feel that it’s our job to make buying a pleasant experience for you.