Categorized | Residential

Rental Market Faces Possible Bubble

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Economists are starting to question the overall health of the rental market. As rents soar and housing prices decline, the possibilities of a rental bubble are starting to be evaluated.  History has proven that renters typically turn to home buying when rents experience a significant gain.

 

In many parts of the country, rents are up as much as home prices are down. Home prices fell roughly four and a half percent nationally, while rental values increased by nearly the same percentage. In some areas, such as Chicago, rents went up by more than nine percent on the year. Minneapolis saw a similar gain.

 

Such increases would typically tend to point to a rental bubble in the near future, though the current state of the housing market may delay that bubble for some time. With stringent lenders limiting mortgage availability, and consumer confidence still struggling in the housing market, the rental market may still be safe.

 

With the rental market performing as it is, many investors are flocking to the foreclosure market, and buying up as many properties as possible to turn into rentals. As one could possibly imagine, multifamily home sales are performing rather well. The number of single-family homes currently on the market is limited, though an increase in the supply of such homes could finally cause rents to fall.

 

Although there has been no sign yet of a rental bubble, economists do believe that there are some red flags surfacing, particularly as home affordability continues to reach new highs through the country.

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About Ella Jourgeson

Ella was recently an intern who checked all the articles for grammatical and spelling errors. She is now an all purpose writer filling in wherever we need help.

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