It is clear that this recession or is it a double dip recession or is it a depression continues to play havoc with the real estate market. Displaced homeowners due to foreclosures are flooding to rental units. Their credit has been seriously damaged primarily due to job loss and the downward spiral of the economy.
The demand for rental units has increased and the supply has not changed.
I have talked about the slowdown in family formations which fuels the home buying sector. As an example, family formations:
2010 - 357,000
2007 - 1,600,000
A pent-up demand for rental housing is currently due to foreclosures and will continue to grow as young people either move back with their parents or seek roommates.
Also, local government zoning has always limited multifamily housing and new projects are sporadic. NAR expects the vacancy rate to be below 5% by the end of the year. Below a 5% vacancy rate is considered a landlord’s market. Not unlike the single family home market which will ultimately become a seller’s market. Landlords have and will continue to push rental rates up.
In my opinion, with monthly rents increasing and difficult to find “newer’ rentals, buying a new home may be the best option today. Builders are re-establishing their product line to lower prices and offering fantastic incentives to buy. With interest rates at another historic low, it is possible to buy a new home today, lock in the interest rate and once you move in, your mortgage payment will be well below the monthly rent in your area. AND the home is yours ---freedom!
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