Will rents rise in next few years?

[23109VC]

I own a small home – 1800 sq ft. It would rent now for about $1600-1700/month. If I rent it out, I will be negative. I could justify doing it, if rents increase in the short term a fair amount.

i am one of those people, like many of you, who believe teh housingm arket will go down and keep going down, at least in the next few years. but I beliweve in the LONG run, 10+ years, it’s going to come back and go up. given inflation, I would think eventually prices will be bac k where they are now and even more so.

if I could keep my house – i have a FIXED low interest rate mortgage – I could justify hanging onto the house as a long term investment.

the problem is, I’d need rents to come up to about $2000-2200/month on a house like mine in the next few years or so to justify keeping it.

anyone here think rents on SMALLer houses in nice areas will increase as the housing market collapses? if popele can’t afford to buy, and want to be in a house, maybe a smaller housei n a nice area will become an attractive rental..cheap enough that they can afford it..

any ideas?

[4plexowner]

The downtown condo market is a huge variable in the rental market, IMO.

There is already a glut of downtown condos that aren’t selling and there are several thousand more that are planned (I doubt all of them will be built).

Housing that won’t sell becomes rentals so I am expecting a LOT of rental condos downtown. Enough of them to depress the rental market in the rest of San Diego.

I have gone from 22 to 0 rental units in the last three years. Partly to take advantage of ridiculously high prices and partly because of what I foresee in the rental market.

On a tangential subject: consider your situation and whether that house is an ‘investment’ or a ‘speculation’. If it doesn’t have positive cashflow it is a speculation in my opinion. I was fooling myself about being a ‘real estate investor’ when all I was really doing was speculating on higher prices (and taking money out of my pocket every month to do so).

[powayseller]

More great advice from 4plex. I can only add something I read from Susan Bies, Fed Reserve Governor: expect CPI to increase, bec. as housing prices drop, rents go up.

Did you try a google search on housing values and rents? Or the Federal Reserve website?

Also wonder why you wouldn’t just sell the house now, and buy it back for 1/2 the price in 5 years. For the money you’ve got into the current house, you can buy 2 rentals in 5 years.

[4plexowner]

Will inflation feed into rents?

If we keep demand constant, then yes, as inflation increases it is reasonable to expect that rents will increase too.

I’m not willing, however, to assume that demand will remain constant during the coming inflation.

I also want to point out that in previous inflations, WAGES were also inflating so the consumer could afford the inflated cost of goods and the increase in housing costs.

During the current round of inflation, we have wages that have been flat for several years (actually declining on an inflation adjusted basis) and I don’t see anything that will change that trend.

At some point the American consumer WILL be tapped out.

There IS a limit to how much debt a person can carry and to how much equity he can pull out of his house.

I’m assuming that the consumer is near that point now.

Consumer debt is at record highs and the percentage of income spent servicing debt is also at record highs. Retail sales are softening and the housing ATM (cash out refi’s) is nearly out of money.

Now we’re going to add more inflation on top of those factors. {And this inflation ought to be a doozy since the US Fed had to hide the M-3 numbers before they cranked up the printing presses. Look forward to gasoline at $5/gallon – bread at $5/loaf – etc, etc, etc.}

At some point, the consumer has to choose between eating and driving and other items. One of those other items is rent.

How can the consumer reduce rent? Downsize / downscale, double up with others in existing housing, move to less expensive part of the country, become homeless, move back in with the parents, etc.

All of the ways that the consumer can reduce his rent expenses result in REDUCED DEMAND FOR RENTAL HOUSING.

When demand declines prices decline.

Yes, I believe this time it WILL be different. (ie, inflation won’t be feeding into rents)

[Author]

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