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1. Houses being kept off the market by flippers (then) and banks (now) who are holding inventory off the market, in the hopes that the market gets better (or the govt will buy their properties?).
2. Housing prices rising to such an extent that asking rents, in general, go up to compensate for losses (like the OP’s family member). Tons of newly-minted LLs charging crazy rents…they’ll experience very high turn-over and costs because of this, IMHO.
3. A ramped-up housing boom (and concurrent spending boom due to equity extraction), which leads to more immigrant laborers coming to the U.S. looking for work. Many of these immigrants are willing to live in denser conditions, so they can techically “afford” very high rents if they have multiple incomes, even if each adult is only paying a few hundred dollars/month.
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What can cause the rent “bubble” to burst?
1. Banks might be forced by regulators to get rid of their housing inventory, once it’s determined that the market is not coming back any time soon. Also, as flippers realize the market isn’t returning, and let go of their negative cash flow “investments”.
2. As PITI payments begin to reach parity with rents, more investors will buy, putting more rental inventory on the market, forcing rents down.
3. As the economy and housing markets decline, immigrants return to their own countries, leaving more rental supply on the market. Don’t discount the anti-immigration policies which tend to occur with severe economic downturns (we experienced this during the Great Depression, though it’s not talked about much).
4. As mentioned above, as the economy contracts, people will begin taking on more roommates and moving back with family members (lots of Boomers still living in 4/2s with empty bedrooms).
