Report: Ready for Rent Explosion?
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Many of you might not know that in addition to doing home mortgage loans, I also own and co-manage about 100 rental units in Salt Lake City, Utah. Over the last 6 months we have gone from 15% plus vacancy to ZERO vacancies as I write this article. Guess what is going through my mind; guess what is going through every landlord and apartment manager in the city’s mind? You guessed it, we’re raising rents. You see inflation is upon us and the first thing that goes up is rent! Compare that to a homeowner who has a 30 year fixed mortgage rate at 5% or less. Guess what happens to him when inflation comes… Nothing! His or her rate is fixed and their payment CAN’T go up. If you are employed and have reasonable credit, renting right now makes little sense for several reasons.
Let’s take a closer look at the last reason. We have often said that the cost of anything is based on supply and demand. The number of widgets for sale and the number of widget buyers together create the price for widgets. That will also apply to rents. There is a much larger demand for rentals right now. The economy has forced many to leave their foreclosed homes and other buyers are afraid to plunge into homeownership. At the same time, the supply of rentals is rapidly decreasing. Here is a graph from Calculated Risk showing the apartment vacancy rate in the United States:
When supply is rapidly decreasing and demand is quickly increasing, prices have only one place to go – and that is UP! That is exactly where rental prices are headed. Bottom LineIs now a good time to rent? I think not. You can buy a home today at a discounted price and get a 30 year mortgage at a historically low interest rate. You can set your housing expense for the next thirty years. On the other hand, rental costs are poised to increase for years to come.
Josh Mettle is a top producing mortgage lender specializing in financing Physicians, Dentists and Medical Professionals in Salt Lake City, Utah. Check out his site http://www.utahphysicianhomeloans.com/ for medical professionals. Josh is also a fourth generation real estate investor, and owns a number of rental homes, apartment units and mortgages. If you're ready to buy or sell residential real estate, get Josh's latest free tips, tools and newsletter at http://www.joshmettle.com. Utah Real Estate Professionals can keep informed by visiting Josh's Mortgage and Real Estate Blog at http://www.joshmettle.com/blog/ |
