Realty Check

Rental Market Reeling

Home For Rent
Home For Rent

During the housing boom, rental agents bemoaned the quick and easy money that allowed so many would-be renters to become homeowners; so you would think now that the mortgage market is tighter than San Quentin, that rental agents would be a bit more positive.

But as the housing pendulum swung back, it crashed right through any theory of supply and demand that might put the rental market in good stead.

For one thing, demographics are working against rentals.

By far, the hardest hit age group in the unemployment picture is the 20-24 year old set.

Their jobless rate has gone from 10.4 percent to 15.3 percent in the past year. Of that age group, and of those not living with their parents, in normal times 70 percent should be renters.

Without jobs, of course, they are not.

And then there’s the foreclosure crisis.

A crisis for one is an opportunity for another.

I’m talking about rock-bottom priced properties.

Take a look at the new rental gap for some of the nation’s largest cities (thanks to John Burns Real Estate Consulting for this). This is how much more it costs to own than to rent, and note of course that many cities now show it’s more costly to rent than to own:

My real concern in all this data is that all those investors buying up all those foreclosed properties will not be able to get enough in rent to meet their costs, or they won’t be able to rent the properties at all. Today’s market is not a flippers market, so investors are going to have to hold for a while. If the rental market continues to weaken, that could dissuade those valuable investors who are eating up so much of the distressed inventory.

Questions?  Comments?