The Depressed Housing Market Now Affects Renters
Renters in certain areas are now beginning to face difficulties because of the housing crisis. This has come as a great surprise to many, since it was widely believed that renters held immunity against the housing crash by virtue of not having a mortgage. This appeared to be quite a safe strategy and many people assumed that they were protecting themselves by waiting for the market to stabilize before purchasing a home.
In some areas, many renters are now discovering that are in fact not immune to the crisis facing the housing industry. One main difficulty is that whereas renters have no mortgage payments to make on a monthly basis, their landlords do. If your landlord cannot make his monthly payments because of adjustable rate mortgages and higher interest rates then he may very well have to foreclose on that rental property, thereby leaving you out on the streets.
Renters have, in some cases, found themselves with only a 30 day period in which to vacate properties they had inhabited for some time. This results in a great deal of stress being placed on many renters while they now struggle to find a new rental property as well as gather the funds to make the necessary rental deposits.
Other renters have also been affected by the rapid national increase in rental prices. Currently, the worst rental markets are in New York and San Francisco. San Jose, Cleveland and Seattle are also beginning to show signs of increasing prices with San Diego and San Bernardino following close behind.
The relative inability of developers to construct additional apartment buildings in these areas is a major factor contributing to the rental price increases being observed. These high populous areas are now suffering from a state of increased demand with limited supply which in turn results in price increases. With an increased number of former homeowners being forced into foreclosure or property sale because of the market crash, the increased rental demand is compounded by the fact that rental often becomes the most viable option to allow these families and individuals to obtain a new place of residence.
The overall national vacancy rates for rental properties has declined by more than 10% over the past four years, thus indicating that the number of persons now renting properties has significantly increased since just before the 2005 housing boom. The national Census Bureau also reports that rental costs have also seen a 14% increase during that same time frame.
The cause of increased rental prices is multi-factorial with one main factor being the fact that a greater number of renters are trying to wait out the market slump before they go ahead and purchase new homes. It is the general assumption among many renters that property prices have yet to hit rock bottom and so for them it just does not make much sense to make housing purchases at this time. Simply put, most renters are trying to avoid being forced into the same situation that many current homeowners have faced during the past two years.
The fact that buyers who would actually be willing to purchase during the down market are having such great difficulties in qualifying for affordable mortgages is helping to make the rental market more crowded than it needs to be. After the sub prime market collapsed, many creditors instituted more stringent guidelines on the loan approval process, including the mandate that borrowers must now have excellent credit. Larger down payments are also now being required, thus making it even more difficult for new homebuyers to realize their home ownership dreams.
Rental market health is now being viewed with some amount of concern since it has s very strong impact on various other sectors. For instance, rental market health frequently affects apartment building construction.