Short answer: possibly.
With a few years of major rent “appreciation”, or increase, people are beginning to wonder if rents will start to level off, or even come down.
Since the housing crash of 2008, rents have been on a steady rise, and at times, spiking. In Cape Coral, a 3/2 average sized home was marketed at $800 a month, where now, some are demanding double that.
In surrounding cities like Lehigh Acres, 3/2 homes were going for as little as $450! Wow, only 10 or 11 years ago!
What causes these changes?
Like any market, there is always a cause effect relationship between certain phenomena. In the case of rentals, we can actually use Newton’s 3rd law of motion: for action, there is an equal and opposite reaction. (my 7th grade teachers would be so proud).
So, in our case, our two forces are home ownership and rentals.
As home ownership declines, we see an increase in rentals. Typically, home ownership will decline when banks make it difficult to get mortgages by making their loan requirements more difficult; higher credit scores being required, more income needed, or stricter guidelines for how long needs to have been at a job, etc.
We also see this happen when the government raises interest rates, ultimately making monthly payments higher, and therefore affordable.
Regardless of the reason, when it becomes difficult to own/afford a home, there’s only one alternative…
Live in your parent’s basement.
No, no. It’s renting.
As home ownership rates go down, rental rates go up. It’s very simple.
So, what’s happening in the current market? Well, owning a home is becoming easier and easier. Banks are offering programs to home buyers that have significantly lightened up on lending requirements, so we’re seeing a large increase in current renters ditching their leases and becoming homeowners. The nice thing is their payments are right about where the rents are, or a little less, so affordability isn’t an issue.
This has left property managers, like us, with less and less people who are “chomping at the bit” to get into a property. What used to take us 24 hours to rent, is now needing a week or two.
So What’s the Bottom Line?
There’s still plenty of people who can’t qualify for a home, or simply prefer to rent over own for their own reasons. We don’t anticipate any significant drop offs in the rental market, but we do see rents leveled off a bit.
Only time will tell!
Remember, for all things property management, keep it here at Douglas!