Tenants begin to be affected by the depression in the housing market
In some areas, tenants are also experiencing problems as a result of the downturn in the housing market. This has come as a big surprise to many people because they thought they were immune to housing collapse because they had not obtained a mortgage. At the time, this seemed like a safe strategy. Many people assumed they were playing it safe by waiting to buy a home until the housing market stabilized.
Many renters in some areas are quickly discovering that they are not immune to housing problems after all. One of the most common problems is the fact that while tenants do not have a mortgage on their property, their owners do have a mortgage. If the landlord is unable to make his monthly mortgage payments due to rising interest rates and adjustable rate mortgages, the rental property could be in foreclosure.
When that happens, tenants could face eviction. In some cases, tenants have found that they only had 30 days to vacate properties that they had rented for quite some time. This has put a tremendous amount of stress on many tenants as they are suddenly struggling not only to find a new place to rent, but also to obtain the necessary cash to make rental deposits.
In other cases, tenants have been affected by rapidly rising rental prices. Nationwide, rental prices have started to rise. Currently, the worst places to rent due to rising rental prices are San Francisco and New York. Seattle, San Jose and Cleveland are also showing signs of rising rental rates. San Bernardino and San Diego are also not far behind.
One of the reasons that rents are increasing in these places is the fact that developers have not been able to build as many new apartment buildings. In heavily populated areas, this has resulted in high demand with little supply. When supply cannot keep up with demand, the natural result is an increase in prices. To make matters worse, an increasing number of former owners are selling their homes as a result of the real estate crisis or are being forced to abandon their homes due to foreclosures. They must have a place to go and rent is often the only viable option for these individuals and families, further increasing the demand for rentals.
Overall, the national rental vacancy rate has decreased by more than 10% in the past four years, clearly indicating that more people are renting properties today than before the 2005 housing boom. Nationwide, rents have also increased 14% during the same time period, as reported by the Census Bureau.
Several factors have contributed to the increase in the rental price rate. One of the biggest contributing factors to rising rental rates is the fact that more and more renters are waiting for home prices to drop before making a decision to buy. Many renters assume that home prices have yet to bottom out. For these tenants, it just doesn’t make sense to buy right now. Simply put, most tenants don’t want to find themselves in the same financial trouble that many landlords have suffered in the past two years.
There is also the fact that even buyers who would be willing to buy right now simply cannot because of the difficulty in qualifying for affordable mortgages. Following the collapse of the subprime market, many lenders have tightened restrictions and are now requesting not only good credit but excellent credit as well. The requirements for larger down payments have also increased, making it increasingly difficult for first-time home buyers to realize their dreams of owning a home.
The health of the rental market is being viewed with some concern due to the fact that the rental market actually has a strong impact on other sectors. The construction of apartment buildings, for example, is frequently affected by the health of the rental market.