Rents across the U.S. have risen above $2,000 a month for the first time ever…and that’s just the nationwide number. Rents here in the west are rising at a much higher rate.
In Arizona, for example, rents are up over 33% year-over-year…and in California, they are up nearly 25%, per Rent.com.
A new report from Redfin shows that nationally listed rents for available apartments rose 15% from a year ago. Again, that’s the national figure – and rents in the west have gone up even more.
In Los Angeles, the median asking rent is $3,400. Rents are up more than 30% in Austin, Seattle, and Cincinnati. Even in formerly affordable cities such as Nashville it’s now $2,140, up 32% from last year.
So, Should You Rent or Buy?
What all of this information is telling us is that housing is becoming more expensive, whether you buy or rent.
“Housing is getting less affordable for everyone at every level,” says Daryl Fairweather, the chief economist for Redfin. She says after the last housing crash we didn’t build enough homes for a decade. And that lack of supply is the biggest force pushing up home prices.
I’m linking from an NPR article – you can find the entire piece here…
Fairweather says home builders built fewer homes in the decade starting in 2010 than in any 10-year period since the 1960’s. “So I think it’s going to take at least another decade to dig ourselves out of this hole.”
On the lending side, I personally have been advising my clients to take a look at their overall housing expenditures to see if purchasing a home might actually be cheaper in the long run.
In many cases, it’s smarter to pay even a slightly higher monthly payment early on to take advantage of building equity instead of paying someone else’s mortgage.
For investors, this looks like a good time to purchase, even with higher interest rates. Rents are increasing, and because of supply shortages, valuations (and expected rents) should continue to rise.
Industry Trends
Here are a few key industry developments, per the Rent.com article:
1. Prospective homebuyers gain some hope in the housing market
According to that Redfin report, more than one in five home sellers dropped their prices in the past month. It’s the largest drop rate since Fall 2019.
“The sudden surge in mortgage rates led to a sudden and significant cooldown in the housing market in May,” said Redfin Economics Research Lead Chen Zhao.
With interest rates continuing to climb, mortgage applications have gone down 14 percent when compared to last year. This housing market cool-down should give current renters a moment to decide their next steps in their home buying journey.
2. Along with interest rates, rent prices are skyrocketing in some areas
With cities like Phoenix and Los Angeles continuing to see dramatic increases in rent prices, it’s difficult to determine whether to move to a new unit, stay, or purchase.
That’s why it’s important to do your research to see if purchasing might be the most strategic move.
Fairweather thinks that landlords are less likely to raise rents by a significant amount for existing tenants versus a new one. Be sure to read over your lease for any restrictions in yearly rent increases and negotiate with your landlord on new terms, if needed.
In Conclusion
Although home prices and interest rates are up, purchasing a home might very well be the best option available, as rents are rising faster than home prices at this point.
Don’t hesitate to contact me to discuss your current situation and how you might be able to take advantage of today’s changing market. It would be my pleasure to help you!
