Are Renters in Trouble? "The Rent is too damn high!"
Those of us keeping an eye on the apartment industry have lately been flooded with articles predicting rent hikes (well, lately might be stretching it — ‘rent hike’ articles have been trickling out of the mainstream media for well over a year now). As a renter myself, as well as writer for the apartment industry, a drastic rent increase is alarming – but is it inevitable?
I have been looking for places to rent for tons of my friends lately and have been astonished at the Spring market costs for renting. I am also in the market myslef, so I have been watching the market like a hawk.
Long story short: probably.
Unless ‘The Rent Is Too Damn High’ Party stages a major coup and wins every election in the next several years (not happening) – we are looking at rents rebounding along with the economy. Folks who have been cramming into studios or tripling up in apartments are starting to pull in more money and upgrading their living situation. People who were forced to move back in with Mom and Dad are now back out on the rental market. Classical economic reasoning stipulates that a decrease in apartment vacancy rates triggered by a demand surge will always result in a rent increase.
Nobody quite knows how the glut of cheap, foreclosed homes will affect rent prices. The high cost of credit as well as the harrowing housing crisis of the past few years may well drive many into apartments, where, at the very least, foreclosure is somebody else’s problem. However, if the cost of buying a place drops below rent rates, people will start to buy again – at which point rent increases will likely be reined-in. The question on everybody’s mind, then, is – how far will rental rates rise before low housing purchase prices cause them to level off? CNN Money predicts rents will raise about 10% in the next two years, compensating for a lack of increases during the recession. High demand cities can expect even sharper increases.
What does this mean for the average renter?
If you’re in a place you like – and you can lock in some sort of rate – do it! Or if you’re thinking to move – do it now rather than waiting 6 months or a year. In Dallas, we have already noticed rents going up quite quickly – and the availability of sweet apartments at reasonable prices has sharply decreased. You want a 2 BR that is not a dank hole of 15 year old carpet with a bedroom the size of a closet? $1800/month! With average rents nationwide going up to $850/month for one bedrooms, there are people out there paying double the average – and feeling pretty happy about it.
What does this mean for apartment owners?
After the recent economic meltdown, building more units due to speculation that demand will increase sounds hauntingly familiar – and dangerous! However, as demand increases perhaps there will be safe opportunities to expand again. In the short term, it seems that increasing rent slightly will not deter renters from moving out of their parents’ basements. Perhaps some of those ‘fire sale’ priced foreclosed homes could be turned into apartments…
Did the housing crisis permanently modify the American Dream?
Foreclosure rates, expensive credit, and a (semi) jobless recovery have forced many would-be and former home owners into apartments. While the American Dream has traditionally included the ability to buy a house – some apartment industry experts have been speculating that recent increases in rental trends imply a fundamental value shift. Has the American Dream changed? Do the majority of Americans no longer include ‘home purchase’ on their list of life goals? I still aspire to buy a house some day – but I have not been burned by a painful foreclosure. Does the American Dream still exist at all?
Yesterday, I was driving by a condo in Lakewood that was listed for sale. I was in my car with the window down, parked outside… writing the info and address down. She asked me if I was looking to buy a condo. I told her no, I am in the market to rent (even though I am considering buying w/these rent rates, it almost seems more practical to buy).
She kindly invited me into her condo to take a look. They were remodeling and she wanted another realtor’s opinion.
I advised her if she had the money for two mortgages. She wasn’t too threatened by the idea, so I assume she does. She has had her house on the market 173 days. I told her my true opinion, “Don’t sell this place. This is an investment and with the leasing market like it is right now, you could have this place leased in two days)… She told me she and her realtor had discussed this and we exchanged info so she could contact me when/if she put it on the market for lease. How nice of her!
Special Thanks to Apartment Blogger for details.
Also, you have got to watch this video from a NY politician on his speech about the “Rent being to damn high!”
To get in contact with me or ask advice on your situation, email me at firstname.lastname@example.org or contact me at 214-364-2295