In some areas, renters are also experiencing problems as a result of the housing market downturn. This has come as a big surprise to many people because they thought they were immune to the housing crash because they hadn’t taken out a mortgage. At the time, this seemed like a safe strategy. Many people assumed they were doing the safest thing by waiting to buy a home until the housing market stabilized.
Many renters in some areas are quickly discovering that they are not immune to housing problems after all. One of the most common problems is the fact that while renters do not have a mortgage on their property, homeowners do. If the landlord is unable to make the monthly mortgage payments due to rising interest rates and adjustable rate mortgages, the rental property could end up in foreclosure.
When that happens, tenants could face eviction. In some cases, tenants have found that they only had 30 days to vacate properties they had rented for quite some time. This has created a great deal of stress for many renters, as they are suddenly struggling not only to find a new place to rent, but also to come up with the cash needed to make rental deposits.
In other cases, tenants have been hit by rapidly rising rental prices. Nationwide, rental prices have started to rise. Currently, the worst places to rent due to rising rental prices are San Francisco and New York. Seattle, San Jose and Cleveland are also showing signs of rising rental rates. San Bernardino and San Diego are not far behind either.
One of the reasons rents are rising in these places is the fact that developers have not been able to build as many new apartment buildings. In highly populated areas this has resulted in high demand with little supply. When supply cannot keep up with demand, the natural result is rising prices. To make matters worse, a growing number of former homeowners are selling their homes as a result of the housing crisis or are being forced out of their homes due to foreclosures. They must have a place to go and renting is often the only viable option for these individuals and families, further increasing the demand for rentals.
Overall, the national vacancy rate for rentals has decreased more than 10% in the last four years, clearly indicating that more people are renting properties today than they were just before the 2005 housing boom. Nationwide, rents they are also up 14% over the same time period, as reported by the Census Bureau.
A number of factors have contributed to the rising rate of rental prices. One of the biggest factors that has contributed to rising rental prices is the fact that more and more renters are waiting for house prices to fall before making a purchase decision. Many renters assume home prices haven’t bottomed out yet. For these renters, it just doesn’t make sense to buy right now. Quite simply, most renters don’t want to find themselves in the same financial troubles that many landlords have been subjected to in the last two years.
There’s also the fact that even buyers who would be willing to buy right now simply can’t because of the difficulty in qualifying for affordable mortgages. Following the collapse of the subprime mortgage market, many lenders have tightened restrictions and now require not only good credit but excellent credit as well. Requirements for larger down payments have also increased, making it increasingly difficult for first-time homebuyers to realize their dreams of home ownership.
The health of the rental market is being viewed with some concern due to the fact that the rental market actually has a strong impact on other sectors. The construction of apartment buildings, for example, is frequently affected by the health of the rental market.
