Rental Market May Be Leveling Off
By Paul Esajian on September 11, 2013
One of the fortunate byproducts of the slow housing sector has been the increased activity within the rental market. Over the past few years, demand for rentals has begun to surge. Stricter mortgage guidelines and uncertainty in the work field, particularly by recent college graduates, has allowed owners to virtually name their rental price. However, current rental market conditions indicate an imminent slowdown. The Center for Housing Policy recently reported that rents are rising faster than income by $1.75 for every dollar earned. Simply put, we are rapidly reaching the level where even the best tenants will be forced to look for a more inexpensive housing alternatives.
What was once thought to be a sustained period of growth, in regards to renters, has leveled off dramatically in recent months. Rental demand is still there and won’t ever diminish, but what has leveled off is the rate in which rental prices are increasing. A large segment of renters have either come from distressed property sales or are living on their own for the first time. They can only stretch their income so far before they have to accept that they need to live in a less desirable property.
With more multifamily and condominium options available, there are more affordable options for small families and new couples. Just because you have rented your property at the same price for a few years with a good amount of demand does not mean that same demand will be there if you increase your price 10-20 percent. In this market, if you overprice your property, it will quickly lose interest and you could actually end up renting for less than you anticipated. If mortgage guidelines change even slightly, many renters will quickly look to purchase instead of rent. If you have a good tenant, do everything you can to keep them in your property. This means neglecting to raise rent, even though the rental market permits it. It is more important to have a good tenant than an extra $100 a month.