I'm going to veer slightly off-course in this post and touch on the rental market. I primarily assist home buyers and home sellers, but changes in the buying/selling market have effects on the rental market, so this conversation seems worthwhile.
New data out this week affirms what I predicted several months ago: prices for rental housing have climbed substantially as the economy continues to feel the damaging effects of the housing bubble. Apartment vacancies fell to 6.2% at the end of June, which is down significantly from 7.8% just a year ago. The effective rental price climbed to $997 per month, up from $974 the previous year.
So what are the long-term implications of this trend? As more and more individuals move away from home ownership and into rentals, the supply of home buyers dwindles. With housing inventory still near record-highs, this could continue to exacerbate the precipitous decline in housing prices we've seen over the past 3 or 4 years. It could also have serious effects on neighborhoods and communities as houses sit vacant for months, welcoming burglaries and crime.
The conclusion to this story is that having fewer and fewer home buyers will only prolong the already tepid housing market recovery. It will be very interesting to see how this dynamic continues to play out over the next several months.
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