Consumers Benefit from a Renter’s Market
As the housing market continues to slump, more and more people are realizing that for the near future, they are better off renting than buying. This is a significant departure from the past few years where consumers were obsessive about owning their own homes and building up their equity.
Today that is no longer the case, however. While rents have continued to rise in many locations, consumers are still finding they are often able to rent for less money than what they would pay for a monthly mortgage payment on a comparable property. In some cases, renters are able to save between 40% and 50% by renting instead of buying.
Steep increases in property values is one of the reasons for this phenonomen in some areas. Today, buyers who were quick to pull the trigger a few years ago are finding themselved with a need to sell. The problem? They are ‘underwater’ and they need to sell at property prices from two years ago. These people are finding that renters are not willing to pay more money than a home is worth. In short the frenzy is gone.
Even renters who are able to qualify for mortgages just do not feel as though they are getting enough home for their money, especially when they can often rent a comparable or even larger home for less money.
As the result of conflicting motivations, experts are quick to point out that the market is neither a buyer’s or a seller’s market. Instead, it has become a renter’s market.
Renters are also holding off on buying because they don’t believe house prices have reached their lowest point. Their main concern is whether the home they purchase today will be worth what they pay for it six months from now. They feel it it much more prudent to pay rent for a few more months and see where the housing market will go before buying a home. Other renters are concerned about the upcoming hurricane season. Few people have forgotten the hurricane season of two years ago that devastated many homes. In those areas, homeowners, especially those without insurance, have yet to recover.
While some areas are experiencing a deficit in supply of rental properties, in other areas homeowners have recognized the wisdom of holding off on selling their homes. They, too, are reluctant to sell their homes now when it seems more prudent to wait and see when the market will stabilize. To help make ends meet, many of these homeowners are willing to rent out their homes to the scores of renters lining up to take advantage of the opportunity. Even homes that are on the market for sale are also available for rent. While renters must accept the reality that the home in which they are living must be available for showings, they still feel the trade-off is quite worth it.
Investors who have been trying to flip homes have discovered that it makes more sense to rent out the properties for the short term instead of selling them. In some cases these flippers have no other options, as they can’t sell their properties at even their more modest prices. In some cases, this means the investors are taking a loss, with negative cash flow.
The situation has become so much of a problem that landlords in some focused markets are having to slash their rents in order generate a small amount of cash flow. These investors are discovering it is far better to rent right away at a loss than to wait several months to find a renter willing to pay the amount they need. Even these upside down landlords are finding that renting them is the safest and least expensive option, at least for now.
How to stop the foreclosure of your home. You don’t need to spend another day worrying about where you’re going to live. Avoid Foreclosure
- Steven Lohrenz
:: Aug.04.2008 :: Real Estate :: No Comments »
