“WHY YOUR RENT CHECK JUST KEEPS GOING UP” was the headline in CNN Money’s real estate special report last month, which could have explained to NOVA, and other D.C. area renters why it is that rents keep rising faster than home values.
The list of reasons was long, and taken all together, fairly convincing:
- Millennials are renting longer
- Housing inventory is tight and getting tighter
- The housing crash scared those who would otherwise have become homeowners
- Baby Boomers are downsizing
- Rental construction slowed when confidence sank after the housing crisis
It all comes down to supply and demand —Washington D.C. and the surrounding suburbs (e.g., Arlington, Bethesda, Potomac, Falls Church, Fairfax) has low inventory (supply) and lots of eager buyers (demand). Although the author may have exaggerated a detail or two (“…there just aren’t enough ‘For Rent’ signs to keep up with the demand”), many D.C. area renters will probably agree with the gist of the piece: rents have been on the rise long enough that it makes you want to think about the alternative: buying. Indeed, Washington, D.C. is now the 3rd most expensive rental market in the country with rents TRIPLE the national average!
D.C. Metro Area renters face a market where high rent bills make saving for a down payment more difficult. The result: more units remain occupied, vacancies go down; rentable units remain scarce…so prices renters pay continue to go up.
Will this Catch-22 situation persist forever? Most likely not: the broad economic news is that this year’s steady job growth coupled with the pronounced turnaround in builder confidence is likely to loosen the supply stranglehold. Last week, there was also the kind of news that can prompt builders to really get going: government data showed purchases of new U.S. homes surged (particularly in the Northeast and West), with sales of new homes soaring 24% so far in 2015. That’s the best showing since 2007.
Of course, before supply outstrips demand (which may be awhile in our area), the situation puts landlords in an advantageous position. D.C. Area investors who bought rentable properties during the downturn can now enjoy steady returns from their properties, or decide to sell in a robust market. If you are leaning in that direction, give us a call and let’s strategize on the best way to get you the most money for your property. And if you are a renter and are feeling “trapped” we have an arsenal of ideas and strategies to turn you into a home owner!