7 Reasons Your Rent is Increasing
Single Family Rents rose 13.1% compared to last year according to CoreLogic’s Single-Family Rental Index. In addition, Rent.com reports that rents are up for one-bedroom apartments by 26.5% and two-bedrooms by 25.7%. As a result, the typical rent in the U.S. is $1,883 per month according to Zillow. So what is happening? Basically, demand is greater than supply, but there is more to the story. Here are 7 Reasons Your Rent is Increasing.
- Improving employment: demand growing for rentals resulting from stable jobs and incomes.
- Return to cities: as life returns to normal with drop in COVID cases, increasing demand for rental property.
- Expiring Mortgage Forbearance Programs and Eviction Moratorium: landlords raising rates to make up for their inability to collect rent during the Eviction Moratorium and pay their lenders during Mortgage Forbearance.
- Increase in home prices: first-time home buyers being priced out which increases demand for rentals.
- Higher mortgage rates: financing is to expensive for first time home buyers so renting is best option.
- Inflation: landlords are also raising rents to compensate for higher taxes, insurance, utilities and repairs.
- Long-term lease renewal: Favorable leases that renters enjoyed during the start of the pandemic have disappeared. With high demand and low supply, rates are much higher for tenants renewing their leases.
While we cannot predict the future, the following items will impact the future rental market.
- Housing Supply: As long as demand is high and supply is low for rentals, rent rates will be higher. An increase in the supply of retail and rental property is critical to slow the growth of rates.
- Inflation: As inflation increases taxes, insurance, utilities, and repair costs, landlords will pass these increased expenses to their tenants by charging higher rents.
- Permanent Rent Increase: Once rent rates increase, they rarely decrease. In bad economic times, rates often stay the same for a period of time, but they are rarely lowered.
- Tenant Behavior: As seen during the pandemic, tenant behavior affects the supply of rentals. If tenants choose to live in more affordable areas of the country, settle for smaller units, telecommute, or live on boats, the rental market will react.
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