Rental rates to increase?

Question

Here is an interesting article (discussing what many of us are already noticing) showing graphically the rate of change for homeownership and renters.

Note the expected increase in demand for rentals anticipated due to ramped up activity by banks to foreclose and evict long term delinquant residents.

http://www.zerohedge.com/news/new-normal-american-dream-renting-about-become-very-expensive

Tony

James Harper · Answer

The thing I am seeing is bunch of previous homeowners that have kids, pets and debt that are used to having a yard and cherish the family pets that just dont fit into the apartment mind set.

That being said, of course pets and kids cause more wear and tear on homes as well.

The piece that I am excited about is the properties that I have that are leveraged, due to as inflation rises, so will rents, but my cost of those funds is fixed.

I see property ownership and rentals as the ultimate inflation hedge (Of course unless the whole economy goes Greece on us, and if in that case, only the producers of food have a chance anyways..)

Lynn McGeein · Answer

Just make sure you balance it with the new apartment complexes on the rise.  Two of my homes in Raleigh are actually getting hit with lower rental rates in the area due to apartments being built.  Not much, just $25 or $50 a month less average rental rates, but rates are actually coming down in the area due to apartments getting cheaper vs. the single family homes that I own.

Brian Levredge · Answer

There are some other factors that will play a major role that weren't even mentioned.  As the echo boomers enter the housing (rental or purchase) market they are entering at a time when unemployment sucks coupled with the fact that most of them will be saddled with massive student loans making it very hard to qualify for a home loan in the first place.  Market research of this group also indicates that they have an inclination towards renting anyway due to seeing what the housing crash has done to many of their own families or friend's families.  Home ownership is not as important to them as it was to previous generations.  It will be a very, very large group of renters.

Leo Kingston · Answer

Whew! You guys are right.... I'd rather be on this forum any day. The subject matter of the link is serious, though, and I don't think we can really predict the effect on either the homes for sale or homes for rent market as of yet. Only time will tell, but it won't be good, that's for sure.

Anthony Halstead · Answer

Thanks Jon for the link, I was in a hurry.

Yes, the comments are very different...

Jon Klaus · Answer

This guy's arguement, on top of what we've already seen, "4.2mm new renters and 1.2mm fewer homeowners since the end of 2006,"  is that millions of defaulting "home owners" that have been living mortgage free, will soon be evicted by the banks, and be forced to come into the rental market.

Seems plausible, but is it really millions?  And when will they be on the street looking for rentals?   All at once, or over the next few years?

Interesting to read the comments after the article.  A whole different mindset than BP.

Jon Klaus · Answer

linked http://www.zerohedge.com/news/new-normal-american-dream-renting-about-become-very-expensive