Buyer Considerations – Increasing Rental Demand Says Buy Now

Declining real estate values over the past five years have not only frustrated homeowners, it has also discouraged potential homebuyers from purchasing homes. The logic is simple. “If it cost more for me to own a home rather than rent, and I run the risk of losing equity in the home that I buy because prices are dropping, it makes more sense for me rent.”  While this strategy may have made sense during the past 4 or 5 years, it is unlikely to make sense in the future.

It’s always a matter of supply and demand. On the supply side, we have had 4 decades of under-building to meet the every growing population. The situation has been exacerbated recently. New construction has not made sense because of the oversupply of homes for sale. On the demand side, several factors have come into play that either have already, or soon will dramatically increase the demand for housing.

– Unemployment still remains at very high levels, making homeownership impossible for individuals that must rent instead.

               – Home prices continue to fall making homeownership undesirable, driving many potential buyers to the rental market.

               – Many homeowners have lost their homes thru foreclosures and short-sales making this group unable to qualify to buy for years.

               – Many former homeowners and retirees are selling their homes and opting to rent instead of buy.

               – Income levels have been depressed leaving little additional money for down payments for home purchases.

               – Lending standards remain very tight forcing less qualified would-be home owners to rent.

What will the substantial increase in demand mean for people that are renting. The answer is obvious. It will mean having to pay much higher rental rates in the future. The higher rates will bring more investor purchases in housing. the demand for purchasing will increase. And, once renters realize the value of purchasing a home, prices will be significantly higher and mortgage interest rates will likely have followed suit.

The solution for renters- Buy now while prices and interest rates are near or at rock-bottom.