It seemed only fitting that just as the housing booming ended in the United States, the rental boom began. But much like the housing boom, too many rentals were purchased too quickly and rates escalated too high. Now it appears that the rental boom is fizzling as fast as it began. So, where is everyone going?
The article, “Renters Strike Back,” written January 22, 2007 by Broderick Perkins and posted on Realty Times, provides growing evidence that renters are taking a stand against the inflating monthly rates.
The evidence of a rental slowdown comes at an interesting time as economists have been struggling for the past year to accurately predict the present and future of the housing market. The past year of 2006 caused many deep wrinkles to form over the eyebrows of sellers and investors as a seller’s market abruptly shifted to that of the buyer.
But how long would this buyer’s market last? A housing crash was mentioned but seemed highly unlikely but still there was no definite sign that this housing slowdown would not continue through 2007 and further.
The rental rebuttal movement may prove to be just the thing economists were waiting for as there seems only one place left to go if people are not living in rentals. The housing market may have to send landlords across the U.S. a giant “Thank You” card.
“RealFacts.com says, even allowing for seasonal adjustments to occupancy declines, rising vacancies in every Metropolitan Statistical Area (MSA) it tracks indicates the rise of renters' backlash.”
“‘For example, after years of strong rent growth, including a 7.4 percent annual rate at the end of 2005, the Riverside-San Bernardino-Ontario MSA occupancy fell 3.9 percent this (fourth) quarter (2006, from the third quarter 2006) with annual rent growth sliding to 4.9,’ the report says.”
Nationwide rentals in 2006 showed an improvement for all but one market (Colorado Springs, Colo.) from 2005, but recent trends suggest a major correction is likely not too far away.
Renters are apparently taking a stand against the continual rise in occupancy rates.
“During the fourth quarter 2006, occupancy declines from the third quarter 2006 occurred in every market tracked, including four MSAs that exceeded a 3 percent decline (Oklahoma City and Tulsa, OK; Oxnard-Ventura-Thousand Oaks and Riverside-San Bernardino-Ontario, CA); six markets with a 2 percent to 3 percent decline; 15 markets down 1 to 2 percent; and 4 declined less than 1 percent.”
Contrastingly, “A year earlier, only one market declined more than 3 percent; two were between 2 percent and 3 percent, five were between 1 percent and 2 percent, and 14 were less than 1 percent, while 6 markets showed occupancy gains.”
The downward spiral seems to be gaining steam. The majority reason people opt to rent properties is because home ownership is too expensive, especially in wake of the boom. But now that the housing market is catering to buyers, offering lower prices, better move-in incentives and more affordable mortgage options, home ownership may actually become more feasible than monthly renting.
Once that becomes the case, landlords who have been puffing on thick cigars the past couple of years, may see their profits go up in smoke.
Back to news articles
|
