An interesting phenomenon has been going on across the country. Housing transactions are going down, and rental rates are going up. I think we are all feeling the burn from a much slower transaction market. Properties are sitting longer, and aggressive range pricing now results in expired listings.
The phenomenon that I find interesting is that even though there is a larger inventory of homes, rental rates are going up in many parts of the country. Depending on the market, rents have increased from just a few percent to over ten in the past ten months. So why the shift? Finally, those that have been waiting to buy a home can negotiate to get into one.
My personal feeling is that there are a lot of people out there that have heard that the bubble has burst and are waiting until the prices drop substantially. I have a couple of associates that desperately want to buy homes, but are adamant about waiting until the market fully corrects. I have told them that chances are that if they wait, they will still end up paying more than they will right now. Right now it seems like a lot of people are standing by the sidelines and willing to pay higher rents instead of jumping into the game.
Our strategy to overcome the objections of these people are to educate them about market dynamics. Chances are that housing prices will not correct to any great degree, but will continue to go up at a much slower pace. Today's price will still be lower than tomorrow's. In contrast, interest rates will never be as low as they currently are again. The cost of money is cheaper now than it will be in the future. Therefore, it is going to cost a lot less money for you to buy that dream home today than to wait a year and try again.
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