We’ve talked about it before and we’re bringing it back again. Last year, we saw rent prices increase 2.6 percent, causing more renters to begin looking at homeownership. Now, data collected by CoreLogic for its Single-Family Rent Index confirms, we’re up another 2.8 percent this year. Just like the buying market, the inventory for homes available for lease is low compared to the demand, driving up prices yet again. Though we’re not at the peak of 2016 when rent prices reached an increase of 4.1 percent, we are still seeing a consistent increase year over year.
Nationally, rent growth was pulled down a bit by high-end rentals, but both high-end and low-end rental markets continue to see increases.
With employment rates on the rise and an increasing demand for housing, it does not look like the rental market will be slowing down soon. Considering we’re expecting close to 8 percent appreciation in home values this year, it’s safe to say rent prices will continue to increase. Of course, metro areas with more job growth and stronger local economies will see the greatest increases, but so too will other markets as people branch out for affordability.
If you’re considering leasing out your property, now could be the time. Depending on when you purchased the property, you could be getting twice as much of a return.
On the other hand, if you’re considering buying, think of it this way – it’s costing you about half a percent per month. For example, for the sake of using round numbers, let’s say you were looking at buying a house for $500,000. That house you’re looking at now priced at $500,000 will be worth close to $520,000 by the end of the year. That means waiting 7 months is costing you $20,000. On a conventional loan for $500,000 your monthly payments could be as low as $2500/month – this could be less than the rent you are paying on someone else’s mortgage!
Now, buying may not be the most feasible option for some right now, but broaden your horizons, run the numbers, and evaluate what makes the most financial sense for you. Whether you’re looking to buy or turn your house into income property, now may be the time to make the investment and start gaining from this appreciation. After all, economists are projecting appreciation will continue in an upwards trajectory until at least 2022. It might just be time to make that appreciation work for and not against you.