On the Market Episode 49- Will Rents Decrease- Let's Discuss
Property values have gone through the roof, rents have skyrocketed, but will it last? Can rents actually come down? This episode of On the Market discusses those concerns! @Dave Meyer brings the Data Deli to us while @Kathy Fettke knows the market cycle. A perfect duo to answer that very question! Is it HCOL migration? Covid? Where do you feel that supply and demand fit into the equation?
Were there followup questions you had? Wondering what comes next?
Let's get talking!
Quote from @Alicia Marks:
No time to listen, but I read Dave's blog post. There are indications of slowing, but I think it's more likely a normalization and not a downturn. With high prices and mortgage rates, fewer can afford to buy and demand for rentals will increase. Builders are slowing down construction, meaning demand will increase. I see another year of increasing rental demand.
We know that Federal Reserve is hell-bent on fighting inflation, and they do this through a process they call "demand destruction." In humanoid terms, this means they want to kill enough jobs that people will stop spending, which would increase supply. With fewer able buyers/renters, prices/rents come down. (A different approach might be to create more supply. Alas... I digress.) So here we are with the Fed continuing to raise rates to destroy "demand" (yes to create job losses) and if they stay the course, we could see rents decrease as fewer people are able to afford the rent, which would increase supply. With that said, we have record household formation, so either these young families are going to live with family, friends or on the streets, or they will pony up and spend the bulk of their money on housing. Right now, as we speak, there are still more jobs than people who want them, and unemployment is very low, so this dream of the Fed's to kill jobs is not manifesting as quickly as they hoped. We should all just stop spending for a month and that could help! Some good news: year over year inflation numbers will improve since inflation really picked up last fall. This might help the Fed adjust its current trajectory.
I think we are definitely facing an affordability crisis for many people. I have had a lot of inquiries for my rentals that have multigeneration or several unrelated people wanting to apply together. While we do have lots of jobs available, the fact that many of the places facing the most labor shortages are due to it not paying a liveable wage. I've noticed that teens are not taking these afterschool jobs as they used to, and those that are left to take them are caught between making too much for government assistance, but not enough to keep from living paycheck to paycheck. I worry that as this affordability factor grows we will have more government dependency, which can greatly affect the wealth divide, voting, and social systems that are already challenged from their current users. It makes the need for truly affordable home ownership that much more out of reach for the average American.