Like others have said rents only go down when people leave the area.
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I respectfully disagree.
What about when all the empty homes now in “shadow” inventory come on the market. IIRC, about 1/3+ of the homes on the market right now are empty.
What happens when people double/triple up? It’s very easy for a couple or a single person to move back in with parents or take in a new roommate.
IMO, Drunkle is right about 1/3 HH income going to rent as being too high — especially for those who make $65K or less. Stupid, stupid, stupid — and yes, I’m calling all the renters “stupid” if they are making $65K (gross HH income)
and paying $2K+ rent.
Very soon, the credit bubble is going to bite all these fools on the a$$, and they will find themselves older and poorer than they were 10 years ago. It seems nobody is saving up for retirement or for emergencies. Most people cannot pay 50% of their net income toward housing and still manage to save after all other living expenses are paid. What about savings???? Maybe that’s why everyone is eyeball-deep in debt and everyone is panicking about the “weak consumer.”
Prices are determined by what buyers are able/willing to pay (and that includes rent). The newbie LLs think they are making a killing charging high rents, but their tenants will have to live with more people/unit in order to make these payments over time, IMO. These arrangements often end up with high turnover and LOTS of damage/maintenance issues.
Years ago, I was one of the only bears who argued that rents would go up in the beginning of the downturn. That being said, I also said rents would go down as inventory is released from reluctant sellers (banks, FBs and old-timers who missed the top). Time will tell which theory is right.
