Rental Prices Surge As Home Values Stay Low
As home values continue to remain at low levels throughout the country, rental prices are soaring in contrast during these difficult times in the housing industry.
Foreclosure Deals released new research that depicts the stark price differences between renting a home rather than owning the same property. The data compare values recorded in 2008 to the current state of the housing market.
Because of the housing downfall that has led to approximately 2.1 million foreclosed homes nationwide, Foreclosure Deals revealed that in the past three years, the cost of rental properties has increased 60% while the prices of homes have decreased 46% across the country.
Analysts currently predict that by the end of 2011, that figure will rise another 4.5% and by at least another 3% in 2012.
“Foreclosures have had a huge impact on home values,” said John Miller, a real estate analyst with Foreclosure Deals. “In almost every market, prices are well below their 2008 values, simply because there are so many homes available.”
According to Miller, homeowners are currently going to pay less on a monthly mortgage payment if they buy their property as opposed to renting it every month.
“Rents are up and they're going to stay up,” Miller said. “Even though it's the best market for homebuyers we've seen in over a decade, the recession made a lot of people reconsider spending at the time, so they rented. This drove up demand, and prices, for rental properties.”
Analysts said the main reason why rental costs are so high today is because they are in greater demand. According to the analysts, buyers don't want to invest in purchasing a home that might go down in value over time in which they won't sell their asset for anywhere near what they paid for it.
Another incentive about buying a property is that an investor could always decide to rent the property to a prospective homeowner for a higher monthly value than what they purchased the home, apartment, condominium or commercial property for.
Foreclosure Deals said the best commodities currently available on the market are foreclosure homes because they sell for 10%, 25% and often 50% off their actual market value. The Miami-based real estate provider added that since the market is currently flooded with foreclosure properties, investors are seeing even greater deals at auctions throughout the country.
Despite the sluggish economy, Miller said this is still the perfect market for real estate investors to buy their own property rather than renting because mortgage interest rates are at historic lows ranging from 3.5% to 4%.
“Not only do you have rock bottom prices, you've got a terrific market to rent out your property while you wait for prices to rise,” Miller added. “Home values will come back, but the days of low mortgages aren't going to be around forever. Once home values rise, those interest rates will rise, too.”