Memphis rents rise- but how?

Question

Verna Littleton · Answer

The answer is simple. Demand is causing rent prices to increase. With the housing shortage, rental rates couldn't help but to increase. So many buyers can't find houses and therefore a lot of them resort to renting after months of searching for a home.

I have several investors that have seen huge jumps in their rentals. One investor recently had a tenant move out paying $750 and now the same home rents for $950 a month. His PM had to charge a higher rent due to rental increases across the board.

All of this is fueled by high demand and low inventory.

Jackson Long · Answer

ha! 10 applicants per unit makes me miss being a landlord on the west coast.

@Cade Edwards totally agree on the relationship between housing prices and rents.  I still don't grok the underlying catalyst, but I am glad you mentioned that.

Scott Mac · Answer

If there are no new jobs, it must still be a population influx and someone has to pay it.

Section-8 (The American Taxpayer) has deep enough pockets to absorb rent increases.

Maybe a lot of Section-8 people have either moved there from elsewhere (such as gunshot Chicago, which has to be scary living there), or a lot of Cradle to Grave welfare recipients are turning 18, or the Prisons are being emptied early due to some kind of political push.

Increase in demand causes higher rents. 10 applicants for every unit, vs 1 applicant every 6 months--where would you feel more comfortable about raising your rents.

Cade Edwards · Answer

@Jackson Long Rent is a lagging indicator compared to home prices. I believe the increase in rent is still somewhat behind on home prices and will continue to rise over this next year.

Jackson Long · Answer

I do not see a big shortage of inventory.  I do not see waiting lists (and that turnkey company that says they have one- is lying).  And for there to be a shortage now and not a shortage two years ago we either needed to lose a bunch of housing (I do not think this happened- but enlighten me if I am wrong) or we had to have a bunch of new people...

Maybe this is one of those cases of spontaneous organization in the universe?  Memphis rents had been too low for too long and suddenly all the factors lined up and every PM and owner simultaneously got the urge to raise rents?

Chris West · Answer

It is an interesting question if it is true that there hasn't been a spike in wages (which it seems across the country that inflation has also hit wages as companies have to pay more to hire/retain employees) and not a massive influx of jobs, you would think that just because there is higher demand due to no inventory doesn't mean a tenant has more money in their pocket to pay the rent.

I guess you could argue that if someone can't find a house to buy, they have the down payment money (if they were to put 20% down) to pay for rent, but without an increase in wages/jobs, and inflation currently eating away at that money, that well would run dry at some point. Irregardless of supply/demand, don't tenants need higher wages from a better job/working more to pay a higher rent. So who knows haha, it's a good question!

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Jason Rhodewalt · Answer

Interesting question. I wonder how much stimulus money plus into that. For us landlords sake hopefully not much!

Memphis rents rise- but how?

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