I read it, and I hear it all the time. Renting is at all-time highs. Renting is the most popular choice amongst Gen Y. Renting is the thing to do…or is it? Guess what happens when there is tons of competition amongst renters? It’s the simple law of supply and demand – prices are going to go up.
In fact, Rent.com surveyed over 500 property managers for the 2015 Property Owner and Manager Report to find out what renters can expect in the next year to help prepare for what’s to come. (Spoiler alert: Rental hikes are not going away.)
It is predicted that rental rates will rise in the next year by an average 8 percent. This is a 2 percent increase over the estimated 6 percent rent hike predicted by property managers in 2014.
On top of increasing rental price hikes, there is another factor that may have you second guessing your next rental payment. According to a recent assessment by Lawrence Yun, chief economist of the National Association of Realtors®, a homeowner’s net worth, will be 45 times greater than that of a renter by 2016. How is this possible? An article from realtor.com details it well:
The Federal Reserve reported last year in its Survey of Consumer Finances, based on 2010–2013 data, that a homeowner had 36 times the net worth of a renter—$195,400 for the former and $5,400 for the latter.
It makes sense: Homeownership is a form of forced saving. Every time you make a mortgage payment, you’re contributing to your net worth.
And these days, more Americans with extra dollars are considering real estate a better investment than the stock market. Luxury owners, in particular, see property as a perfect place to stash some cash until they need it.
“At the top of the market, there’s certainly a pop of people just looking to park that dollar,” says Ginette Wright, vice president of luxury marketing at Coldwell Banker Previews International, which recently released its Luxury Market Report for fall 2015.
So what’s a renter gotta do to grow some wealth around here?
Weigh your options, like all those hoping to buy a home who don’t have stockpiles of cash, or both great credit and a decent down payment, to compete in this tight market. Consider a smaller home. Consider moving farther away (“Drive until you can afford it,” goes the saying). Consider a city of opportunity, where home prices can still accommodate that entry-level buyer.
You could also choose to ignore the hype, no matter how substantiated it may be. We’re relying on the assumption that home values will continue to grow or remain stable in the long term. Certainly, the consistent rise in home prices, this year from last, would make it seem that way.
Meanwhile, homeowners, we won’t dissuade you from breaking out the Champagne. But don’t spring for Dom Pérignon just yet. Just to be safe, and to hold on to some of that net worth, may we suggest Bota Box wine.
Are you ready to sell your home and need help finding the path to your new one? Call 877.672.4543 to speak with a mortgage loan officer, fill out our online mortgage application or visit a Mercer Savings Bank location near you today.
Information contained in this article from realtor.com