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Where Are Rents Headed?

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People are delaying the decision to buy a home because they are not sure where prices are headed. If they buy and prices continue to soften, they feel that they will not have purchased at the optimal moment. They reason that, if they sit and wait, they can’t be hurt. This thinking assumes that a non-decision comes without consequence.

The normal retort to this thinking by people bullish on real estate is that prices may soon turn to the positive or that interest rates will start heading upward. Buy now before the cost of buying increases! Today, we want to look at this from a different angle. We want to alert our readers that their housing expense is about to increase if they continue to rent.

Currently, in most parts of the country, buying is less expensive than renting. Plus, purchasers can lock in their housing expense for the next thirty years by buying now. They will get a sensational price and a record low interest rate. What will happen if they continue to rent?

The Alternative to Buying

If a family continues to rent, they are looking at a housing expense which will rise with the market. Rental costs increase by 3% a year historically. But today’s rental market favors the landlord to a greater degree. Below is a graph of how rental prices have increased recently and where they are projected to go over the next few years based on a report from Marcus & Millichap.

 

Bottom Line

Hoping to save by delaying the purchase of a home may result in higher housing costs while you’re waiting, thus achieving the exact opposite result. Check with a local real estate professional to determine the best option for you and your family.

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55 Responses to “Where Are Rents Headed?”

  1. Reepublisher February 8, 2012 at 12:22 pm # Reply

    Seriously? That’s less than 2% appreciation in rental rates!!
    Let’s see the graph over the last 100 years dude?

    • Anonymous February 8, 2012 at 12:56 pm # Reply

      It’s actually showing a 4% annual increase over the next few years as was projected in the article (which is linked in the post). The historic annual rental increase has been approximately 3%.

  2. Ruthmarie Hicks February 8, 2012 at 2:00 pm # Reply

    Rentals are going up by double digits around here. Its actually pretty scary.  People who have lived comfortably in rentals in many of our communities are being dislocated and are finding that getting anything else approaching the price they had before means a major geographic move or major downsizing.  A national chart really doesn’t tell the whole story. High density areas are getting whacked with major rent increases. 

  3. Heathersellsva February 9, 2012 at 10:33 am # Reply

    i’m surprised that this article does not even address the interest rates and pricing now compared to the increased interest rates that are going to start happening towards the end of this year…so even if renting while waiting for that perfect time to buy these yet to be buyers will end up paying more for their mortgage payment as well…even if that mortage is still less expensive than renting or as I like to call it paying someone else’s mortgage and getting none of the tax breaks.

  4. Deanna March 9, 2012 at 2:16 pm # Reply

    Thank you!

  5. Re1gladwin May 29, 2012 at 2:57 pm # Reply

    Come to Michigan (the real world) – you can rent a nice 2 bdrm for $400.00 a month.  The
    graph editors are way out of touch.

  6. Ida Bear September 17, 2012 at 5:44 pm # Reply

    In my ‘real’ world rents are in excess of $1200+ a month and they is not even for a decent area with decent school. LOW rent districts are more like 800+ per month and you need to hire personal security to live there. Our challenge here is the market turns over soooo quickly because its a large Military area. CLients are tempted to buy because of the high rents but its tricky to advise them because they may have to leave in 3 years…

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