By Colleen's Contributor, Rhonda Levan
Image: Jennifer Ellison / FreeDigitalPhotos.net
As Home Sales Struggle, The Home Rental Market Gains Strength
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Historically, the home rental market was mostly people who couldn’t afford to buy a home or who planned on moving in the next year or two. These general trends, along with so many other aspects of our society, have changed drastically since The Great Recession.
The pool of home renters has expanded rapidly to include people too nervous to buy, those who lost their homes in foreclosure, and young people who are taking longer to save for a down payment or settle down.
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These renters are finding a new group of rental homes – the great unsold inventory of well-loved homes. Many proud homeowners need to move, but don’t feel comfortable with how their home value has plummeted over the last 4 years. When these sellers find they can’t get as much as they want for their homes, they frequently decide to become landlords “until things turn around in home prices.” Of course, none of us know whether this 4 year housing downturn will drag on, so we may see this new class of rental homes well into the future, but such well-maintained homes are now crowding in on the run-down starter homes that were once the rental-market staple.
Another trend supporting the rental home market is the super-low interest rates. Several of our sellers who have decided to rent their homes have mortgages in the 4% range, which makes renting the property a positive cash-flow experience. At the same time, the new group of home renters has helped rental rates rise at the same time that home prices are falling.
The lower-price / higher rent situation has also attracted many new landlords to the housing market. They see this as a once-in-a-lifetime opportunity to buy at great prices, lock in great interest rates, and be cash flow positive almost immediately. If you are considering renting the family home, be sure to check with your CPA to discuss to discuss the tax consequences.
Our society norms continue to change, and a shift in the housing market is one of the strongest ways to measure those changes. If you can’t sell your home, perhaps the idea of becoming a landlord will hold new appeal to you. If you plan to live somewhere new, you may find yourself considering renting a well-maintained home, even if you’ve been a homeowner for years.