Steeper borrowing rates and higher prices in the housing market Leading many buyers to give up.. That’s welcome news for homeowners.
Future homebuyers are faced with affordable issues that are likely to get worse before they get better.Existing home selling price Reached a record median May sales were $ 407,600, but sales declined for the fourth straight month.Mortgage rates Almost doubled According to the Mortgage Banking Association, it has helped raise the median mortgage payments for new loans by $ 513 per month since January.
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This trend is ready to continue — the Federal Reserve has signaled it to do so. Continue to raise short-term interest rates To combat inflation — single-family homeowners say they are in a good position as more homebuyers have no choice but to rent.
According to housing data provider CoreLogic, single-family home rents rose 14% in April this year from a year ago, rising at a record pace for the 13th straight month.
“The higher the price, the better for the business,” said Bruce McNee Large, CEO of Kinlock Partners, owner of rental housing, at an industry conference last month.
According to CoreLogic, the shortage of existing housing available was also a factor contributing to higher rents. According to analysts, homebuilders are also expected to reduce the amount of homebuilding as interest rates rise and they are reluctant to pay homebuyers.
According to the Department of Commerce, housing starts, an indicator of US housing construction, fell by 14.4% from April to May. Meanwhile, another indicator of US homebuilder confidence fell to its lowest level in two years in June for the sixth straight month, according to the National Association of Home Builders.
In contrast, 74% of single-family homeowners surveyed by John Burns Real Estate Consulting LLC in May this year say they expect strong or very strong leasing activity to continue over the next two quarters. The response fell from the 2021 high of 91%, but still surpassed where pre-pandemic sentiment was.
Invitation house Ltd,
Earlier this month, one of the largest rental homeowners in their homes said rents continued to rise at an even faster pace than last year during the first five months of 2022. It was the worst ever, the company said.
“Demand is getting stronger today,” said David Singelyn, CEO of a publicly traded company.
At an industry conference in May.
Small operators like McNeilage say they have had similar success. “For supply and demand, we are raising rents by about 15%, which is lower than our peers in many areas,” he said.
Still, not all is good news for these companies, and some challenges are imminent. Shares of 3 Landlords of Listed Rental Homes — Invitation Homes, American Homes 4 Rent,
— Each has fallen by more than 17% so far, as the stock market has fallen more broadly. Investors may have confused the fate of single-family rental companies with the slowdown in the home market for sale, according to some analysts.
Most analysts also state that the current pace of rent growth is unsustainable. According to a new report from Moody’s Analytics, lessees’ finances are being pushed to the limit in more cities. Moody’s found that since late 2019, the proportion of U.S. metropolitan areas where the average income earner has to spend more than 30% of their income on apartment rent has skyrocketed, rising from 8% to 23%. ..
John Porowski, an analyst at real estate analyst Green Street, said that if rents are too high, they may choose to double their apartments and homes, resulting in higher vacancy rates and slower rent growth. Said there is. Others have pointed out that if the economy goes into recession, it is likely to put pressure on rent.
But that hasn’t happened so far. Trends such as working from home continue to drive demand for additional space provided by single-family homes. “House prices can go down significantly, but we don’t see rents going down that much,” Paulowski said.
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