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Rents Go Up, Prices Follow
November 16th, 2011 9:39 AM

According to chief economist, Lawrence Yun, of the National Association of Realtors, rental prices are beginning to rise and in the long haul, so will home prices:

"Housing affordability is about the best it's ever been, but tight lending conditions have made it difficult or buyers to take advantage of the good conditions.   But for investors with cash, it's a golden time to buy.  For investors who can hire out or manage property themselves, the attractive rates of return from rising rental income is a strong lure.  Rents rose at a better than 3% annualized rate in the third quarter of 2011.

There is no reason to believe that rent growth will cool, due to the high number of owners of foreclosed homes who cannot buy in the near future, and the low construction rate of apartments.  If annual rent gains stay near 3.5%, rents will double in 20 years.  If they reach 5%, rent doubling would occur in just 14 years!

In addition to strong rent returns, investors can anticipate solid home price appreciation over the long haul. With the bubble clearly gone, the future home price path should follow the future rent growth path.  That means home prices should also double in 14 to 20 years. 

Long term investors buying today are sure to catch some, if not most, of the upward ride."

 


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Posted by Barbara Doeringer on November 16th, 2011 9:39 AMPost a Comment

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