Last updated August 10, 2021
The housing market boomed with the pandemic as more people moved to lower-cost cities, driving up the market in those areas. Per Zillow, the average increase for US homes was about 13%, but in certain cities, like Austin, Texas, it increased by a whopping 30%. In Montana, the price increased by 18.4%.
How has the housing market affected the rents?
With the hot housing market, baby boomers and younger homeowners listed their houses to seize the opportunity. Once their houses are sold, they either buy in the hot market or become renters. Those that can work from home can continue to relocate to lower-cost cities. With the business reopening, those returning to office work in larger cities will need to rent. High home prices have created more renters, with buyers either outbid or wanting to wait until the market cools down.
The demand for single-family homes and apartments in smaller cities has soared. It is a terrible time to buy and rent. From Market Watch, the top 10 cities require wages greater than $39/hour. Housing wage is “the hourly pay a worker must make to afford a home at the fair market rent without spending more than a third of their income on housing costs.”
Per Apartment.com, rent increased by 7.5% over the past year and will continue to grow as the demand continues. “I think we’re going to see increases for the next 12 to 18 months,” said Robert Pinnegar, president of the National Apartment Association. “We’ve never had three generations in the rental housing space, at least not in the numbers we’re seeing now.”
Did the eviction moratorium contribute to the crisis?
“About 23% of small landlords, owning between one and three single-family homes, planned to sell at least one property due to difficulties caused by the eviction ban, according to a February survey of 1,000 such owners by the National Rental Home Council” per Reuters.
This could reshape the market in the United States. Local landlords, ranging from small “mom-and-pop” owners with a few units, provide the bulk of rental properties and affordable homes. But with the eviction ban, these local landlords have experienced financial hardship. They are essentially small business homeowners who need to pay property tax, utilities, and upkeep. With no income, they are forced to use other income, if they have one, tap into their savings, or sell the properties to more giant corporations.
Mom-and-pop landlords may lower the rents for good renters that pay on time or be more lineate on the rents. Some landlords are also increasing the rent to be conservative and make up for their losses in other rentals. In specific locations, there is no rental cap, so prices are growing. Renters are bidding for the homes and driving up the rents.
More affordable listings are not available as the eviction moratorium has been extended till October 3rd in areas where COVID 19 is rampant. Less supply means a higher price.
Large Corporation now the Landlord
Blackstone and JP Morgan are buying up neighborhoods and renting them out. This makes home buying more difficult for first-time home buyers and fixed-income buyers. Corporations can make cash offers or offer higher prices since they have lower interest rates than the general public.
When large corporations take over neighborhoods, there are fewer homes to buy, and more renters will look for rentals. Prices will continue to spike. Affordability will remain an issue for the future to come.
Let’s hope the housing market continues to cool down and help Americans find affordable homes.
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