High Vacancy Rates, Falling Rents
http://money.cnn.com/2004/02/10/pf/yourhome/rentalprices/index.htm
Comments? What do you think?
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http://money.cnn.com/2004/02/10/pf/yourhome/rentalprices/index.htm
Comments? What do you think?
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Rentals always depends on the area and any number of underlying factors, read what you want into the report I might stay out of the markets they discussed and looks for markets that or undertapped. Might also be a good time to turn SFR rentals into Owner financed properties. But talk to your CPA about tax implications[ Edited by scottbrown69 on Date 02/11/2004 ]
What is special or unique about this article? The forces of supply and demand always find a point of equilibrium. The rental market is not immune.
Well, although the article was very top line, what was special about it for me was that among those cities mentioned, the largest rent decreases happened to be in the South and the West, areas of the country that by all accounts are recipients of migration from the Northeast and Midwest. That was certainly something I wasn't expecting. And on the flip side, seeing increases in cities like Detroit and Philadelphia was also unexpected.
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Interesting article. This fact about increasing vacancies and the spread between increasing housing prices and decreasing rents is pointed out in a book I skimmed recently. The book was called something like "The coming crash in housing prices". The author had exhaustive charts pointing out this discrepancy along with many others. In the past, this discrepancy has always been resolved by a decline in housing prices. Now, he wasn't talking about a major drop in prices like 40% although isolated areas possibly could get hammered the way they did in Texas in the 80's. My own expectation is that with the large number of people entering the landlord business, along with what I expect will be a slowdown next year, you will have falling home prices and flat rental demand for some time. I'm not an economist but with the rapid increase in government spending and the drastic drop in interest rates, they have thrown everything but the kitchen sink at the economy to keep it going. I do agree with what has been done, but with all time high levels of personal debt and the government now having limited resources to stimulate the economy, we really need a slowdown to correct things. People are getting way to risky with their finances.
<i>the largest rent decreases happened to be in the South and the West, areas of the country that by all accounts are recipients of migration from the Northeast and Midwest</i>
Not as many people migrate from the Northeast to the South and West as you'd think.
In fact the numbers favor more people moving to, rather than moving from, the Northeast each year.
One of the biggest reasons people relocate to the Northeast is college. The multitude of universities here are an incredible draw.
And many of those students remain in the Northeast (particularly the Boston area) after graduating.
That's why the Boston area often bucks the national trend.
I think a fair degree of caution is good for buying a rental property in today's market. However, it's also a great opportunity. If you can find a good unit that is rented and either covers your costs or creates some cashflow, you'll be sitting pretty when interest rates go up and the rental market comes back. I personally don't think you should ever buy anything with a negative cash flow and then bank on appreciation.
I'm a firm believer that you can find opportunity in any market. You just need to be creative. Doing something is always better than doing nothing. If anything, this article should just make you "proceed with caution". Don't let it discourage.
I'm a firm believer that you can find opportunity in any market. You just need to be creative. Doing something is always better than doing nothing. If anything, this article should just make you "proceed with caution". Don't let it discourage.