Could a prosperous rental market drive people back to home ownership? Over the past year, we have noted how the multifamily property sector of the commercial real estate market has been growing in response to greater and greater numbers of renters entering the market. Many analysts predict that this trend will continue over the next several years, leading many investors to start buying up rental properties and apartment complexes in an effort to get in ahead of the wave of renters either leaving homes or opting not to commit to a mortgage payment. However, some analysts who are looking even farther ahead believe that this trend will ultimately be what spurs the housing market back into positive action[1].
John Burns, a California real estate analyst, speculates that rising rental costs – which go up each year thanks to inflation and, additionally, will probably rise further as the demand for rental housing becomes greater – will ultimately make owning a home more attractive once more. The equation is simple, he explains: “As rents rise and the cost of home ownership declines, owning is becoming more attractive.” In addition to many renters who are renting because they cannot currently invest in a home thanks to credit or income issues, there are also additional demographic variables in play, such as a younger generation who prefers to rent and a retiring generation of baby boomers who have plenty of money and will drive rents up as they leave their larger, family homes.
Already, according to the Mortgage Bankers Association, mortgage applications to purchase homes jumped last week even though interest rates rose slightly. Michael Fratantoni, the association’s vice president of research and economics, believes that this is a preliminary indication that “consumers are feeling somewhat more confident with their financial situation.” For now, however, multifamily housing is still on the rise, and the National Association of Realtor’s chief economist, Lawrence Yun, predicts a banner year for the sector in 2011. Are you investing in rental properties? If so, what kind?
Thank you for reading! Your comments and questions are welcomed below.
[1] http://www.cnbc.com/id/40417678
Rising Rents Could be the Key to Future Market Growth”.
This seams like a bunch of hush wash inflated exploitation with out security for the people. Most people that have lost their house to job insecurity foreclosures do not qualify for a mortgage.
The only way housing is going to even out securely is by freezing rents” or serving affordable mortgage insurance to house owners. Most people have been foreclose because insurance was not present to cover for job losses.
An inflated government is insecured and more so when people are not secured in their own house. It sure is a painful shame that foreclosures take preference over the security of a person (s) and lives insecurity to further KO the future generations.
An insecured government is an insecured people and it seams that the formula is to create perdition and hardships with inflation, “disparities of wage difference”, job insecurity that leave no dreams to look forward to.
In 1970 everything went inflating, but at the end of 2010 the bubble may burst and crash the markets worldwide..peak oil/ethanol has created inflation in food chains and in the price of tortillas also is hard to build streets and buildings of fools gold, much less “streets of gold”.
What I am saying is that with out jobs how can we pay rent, even as it is we can not pay the present inflated rents. How many must freeze to death in a card board box or sleep under bridges and inside cars and vans, etc.. Somebody is against the welfare of the People any where..The End.
Sincerely, For Us.
What?
This sounds so much like what I have listened to in the past from other real estate experts, it did not pan out well then either.When the job numbers just came out this last couple of days, it did not sound like people are going to be buying or even renting any time soon. So I am suspect of what Mr. Burns is saying, 39,000 jobs added is not a recovery, hell it is not even a recession, it is worse than that!
Things are not going to do well until we get some of the people working so hard to tell us how great things are, start being more truthful. It is time for them to understand, they helped bury us in the problems we are currently having, and instead of more of the same, they should listen to some of the truth about what is happening and going to happen in our country!
Yes, we are going to have inflation, high inflation because of the current economic policies by Obama. The part being left out is how this high inflation is going to make it even harder to qualify for a mortagage, even harder to make payments. Where is this included into Burn’s equation?
Where it is probably true some investors are going to attempt to get in front of the possible, not likely wave, people will need jobs, income, and lower inflation for this to be realized in the future. Nothing is pointing to anything but high inflation in the United States!
I think it is time for people to understand, the recession we are in, is mostly isolated to parts of Europe and the United States. We are being held in it by our current policies, not the policies of yesterday, which some liberals are so intent are misclaiming! If we have high inflation, none of what is being proclaimed by the same people that screwed things in the past is going to happen tommorrow either to our benifit.
As a Realtor in what used to be considered a quickly growing county in Pa, the population is moving out, not moving in. Schools are consolidating and they are closing. It’s very simple. 1) Those who are buying nowadays are few and far between and consist of builders who will only spend up to $79k. and “first timers” who are insisting on renting with the option to buy. 2) People don’t want to be on the hook for 30 years because of the present uncertainty. No job, no work, no prospects for long term employment = no pay mortgage.
If one is renting, they can forfeit their security deposit (by leaving in the middle of the night without notifying the landlord) and move states away to where the “jobs” are to start over again. -if something long term (over a year) even exists anymore. Does it? One has to go to where there is sustainable, long term employment. If there’s no IBM or HP or Walmart or any other large company within 70 miles of a rental, renters and buyers alike aren’t moving in and sellers are moving out due to foreclosure.
Wasn’t it NAR’s last Hired Talking Head that went on TV and said he purposely misspoke (lied) about things pertaining to the Real Estate BUST even though the numbers were screaming the TRUTH?? I think we are seeing a lot of kids moving back in with their parents, parents with kids, people sharing a house or just about anything but hooking up with a year long rental agreement and certainly NOT a mortgage! And if Hyperinflation becomes reality, we will see more and more of the above.
I am a landlord in the Chicago metro area and I am finding strong demand for my rentals. I have mostly SFH and a handful of 2 units. The quality of applicants is better than in years past. Many of these folks would have been buyers in 2006, but now cannot get financed. It is still extremely difficult to get a home financed and sold through traditional banks. Myself and other investors are buying foreclosed homes, fixing and renting/lease optioning them. There are typically at least two generations living in the same house. The good news is that means more paychecks or support checks to cover the rent.
I am unclear how the nicely improved rental market will translate into the rest of the market. Until people can get credit and feel optimistic about their job/finances, the market will not improve.