Serious Signs of Softening in U.S. Rental Market
The Wall Street Journal reports today that the flood of investors into the housing market is not only pushing up home prices, it is also putting downward pressure on rents. Growing numbers of people are buying real estate as an investment, with the intention of flipping it or moving into it later. That is increasing…
The Wall Street Journal reports today that the flood of investors into the housing market is not only pushing up home prices, it is also putting downward pressure on rents. Growing numbers of people are buying real estate as an investment, with the intention of flipping it or moving into it later. That is increasing the supply of rental property. At the same time, low interest rates have pushed many would-be renters into becoming homeowners, thus lowering demand — and prices — for rentals.
At some point, declining rents have to negatively impact housing prices, right? But the news isn’t bad in all markets. In Riverside, CA, new rentals are swamped with interest in the first 24 hours. And judging from the recent experience of an apartment hunter documented on Curbed, the rental market in New York has not softened either.
Speculators Push Rents Down [Wall Street Journal]
Rents haven’t gone up, but housing prices have skyrocketed.
When housing prices fall, what will happen to rents?
I assume less demand for buying means more demand for renting. Therefore, shouldn’t rents rise?
Of course lowerer sale prices might not mean fewer buyers — just lower prices, so maybe there’s no correlation between the two at all.
Way back when we went thru this sort of boom the last time, the sales prices fell but the rental only softened a bit. Makes sense when it costs more to buy than rent. Also, many of the new condo and co-op owners who couldn’t sell for more than they bought sublet if there were able to cover their costs. Of course those who couldn’t — and those who needed two incomes but had only one (splitting up in one way or another) ended up either dumping for the cost of the mortgage or walking away. A $425K one-bedroom was bought for $55K at foreclosure in ’97.
I have also noticed some very, very slight rental increases. But mostly the rental market seems flat. Stabilization is going away in NYC, but if you are a market-rate landlord, you still have to be competitive. Under market rate, tenancy will be a more fluid thing in the city — landlords will either have to match deals or watch good tenants move out. This is something small-scale multifamily owners should be mindful of
“But the news isn’t bad in all markets.”
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Spoken from an owner’s point of view. As someone looking for a rental, I can say that this would be welcome news. Sadly I haven’t seen evidence of any cooling in NY rentals… the opposite is more likely!
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While I sympathize with current owners who’d rather see prices rise or stabilize (I own a house in MD), as someone who’s looking to rent in NY and who has many friends that have been locked out of buying, I would welcome a gradual market correction, in both sale prices and rents.
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(how do i get paragraphs to work in this silly comment system!?)
I don’t think this will impact NYC nearly as much as these other areas because NYC is such a big rental market to start with. The vacancy rate on apts. is so low that a very large number of units will have to be added to have even a small impact. While there are a large number of units being built it is still a very small percentage of the overall units out there.
In areas where most people own, i.e. suburbia w/single family homes, there are a small number of renters in the first place. Therefore it is much easier to increase the total quantity of rental units and put downward pressure on rents.
Lower rents are never a bad thing for NY’ers!
Just in my own observation – rents here seemed to go do then stabilize for awhile – late 2001 thru 2004 – then in past year have been increasing.