In the US Market, Renting is Just As Hard As Buying Right Now
Record Jump In Rents During 2021
The red-hot US housing market shows no signs of cooling even though other assets like stocks and cryptocurrencies have faced losses to start the year. Analysts attribute this to ongoing pandemic-related trends in the real estate sector. More people are working remotely and choosing to move from coastal cities to Sun Belt states.
Additionally, with mortgage rates set to rise, many home buyers are rushing to get deals done. Meanwhile, the number of homes for sale is still low — active housing inventory is down 28% year-over-year as of late January.
These combined factors aren’t just impacting home purchase prices. They’re also driving rent higher for many people. CareLogic reports single-family home rental prices grew by 7.8% on average in 2021 — the highest such number ever recorded.
Institutional Investors Eye Rentals
Upward pressure on home prices has predictably left a number of potential buyers unable to come up with the down payment needed in order to purchase. Others simply prefer not to take on a mortgage, leaving them looking for rentals.
Meanwhile, hedge funds and private equity investors have also been buying up single-family homes in order to then put them on the rental market. One firm bought an entire neighborhood in Texas. Florida has been another state on investors’ radars. Housing research firm Zelman & Associates says over $85 billion has been invested in the purchasing and renting out of homes in recent years.
This means that as available inventory is gobbled up by small landlords and institutional firms alike, individuals are more or less forced to rent. Their monthly payments aren’t a bargain either — they’re rising in sync with the overall market.
Follow the Sun to Find Housing Hot Spots
Although places that were hard-hit by the pandemic, like New York City, are starting to see their rents recover, southern cities are still hotspots. IRents spiked 12% from the same period a year prior in December, with Miami leading the way — rents in the city rose over 35% from the final month of 2020.
Unfortunately for renters, the market looks unlikely to let up anytime soon. This is according to housing economist Jay Parsons who notes a demographic shift when it comes to purchasing vs. renting. There is a cohort of upper-income Americans that don’t want to be pinned down in one place. All of these factors are putting upward pressure on an already hot real estate market.
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