Rents Rise As Would-Be Buyers Wait
Fewer homes are selling because of volatile prices and subprime uncertainties, pushing up rents from San Francisco to Baltimore.
Many potential first-time home buyers these days are waiting to see how the national housing slowdown, the local market bubble and problems in the subprime lending industry pan out before committing to a mortgage.
In cities such as San Francisco and New York, would-be buyers fear the market is inflated as prices rise even while properties take longer to sell. In other parts of the country, people are waiting for falling home prices to stabilize before they take the plunge.
The national picture looks like this: Fewer homes are selling and rents are on the rise. It’s a big change from just a few years ago, when home prices were appreciating like mad and everyone wanted to benefit.
During the housing boom, the ‘rent vs. buy’ decision became a ‘buy’. Now, nationally, the pendulum is swinging the other way. As a result, there are fewer vacancies and increased demand for apartments, allowing landlords to raise their fees. Tighter lending standards also are increasing competition for rentals by locking more people out of home ownership.
According to New York real estate firm Reis, the average U.S. asking rent rose 1.1% in the second quarter of 2007, to $1,002, 7.74% higher than it was two years ago. The national vacancy rate fell to 5.8% in the second quarter, from 6% in the first.
Waiting for the tipping point
How long will renting remain a more appealing option than buying? Right now, there are still many unknowns, despite widespread predictions that the market will turn around early next year. On July 10, credit-rating agencies Moody’s Investors Service and Standard & Poor’s (like BusinessWeek.com, S&P is a unit of the McGraw-Hill Companies) said that the subprime situation could get worse as many adjustable-rate mortgages reset between September and June, and borrowers consequently default.
But if rents keep rising and prices keep falling (and the NAR says the national median existing-home price will slip 1.4% this year, to $218,800), fearful buyers could slowly become bargain hunters.
When negative news comes out, from a consumer’s point of view, they just see ‘housing is bad. But that just doesn’t make sense in all markets. Eventually, renters will say, ‘I’m tired of putting my rental payment into some landlord’s pocket — I want to build equity.’
See a slideshow on the U.S. cities where rental rates are rising fastest.
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Rents Rise As Would-Be Buyers Wait…
Many potential first-time home buyers these days are waiting to see how the national housing slowdown, the local market bubble and problems in the subprime lending industry pan out before committing to a mortgage. But who know what would happen with na…
Rents Rise As Would-Be Buyers Wait…
Many potential first-time home buyers these days are waiting to see how the national housing slowdown, the local market bubble and problems in the subprime lending industry pan out before committing to a mortgage. But who know what would happen with na…
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