It may be no surprise to many, but as prices of homes have heated up nationwide over the past few years, so have rents, to the point where some realtors nationwide are suggesting “politely” to renters, to overbid when looking for apartments to rent.
In addition, according to the Wall Street Journal, buyers with million dollar incomes are now overbidding on $3500-a-month apartments, as interest rates have begun to rise.
According to Redfin’s Rental Market Tracker, the median US rent passed $2000 for the first time in May and has risen 15% over the last 12 months.
“More people are opting to live alone, and rising mortgage-interest rates are forcing would-be homebuyers to keep renting,” said Redfin deputy chief economist Taylor Marr.
“These are among the demand-side pressures keeping rents sky-high,” he added. “While renting has become more expensive, it is now more attractive than buying for many Americans this year as mortgage payments have surpassed rents on many homes. Although we expect rent-price growth to continue to slow in the coming months, it will likely remain high, causing ongoing affordability issues for renters.”
In Pasadena, which has 44% renter-occupied households, rents have risen steadily over the last four years, with the average apartment currently going for $2,912 for an 859 square-foot apartment, according to rentcafe.com. Eighty-eight percent of apartment rents in Pasadena are over $2,000, while 10% are from $1501-$2,000, and 1% are at $1,001-to $1,500.
Rents rose from an average of $2400 to $2,912, from November 2018 to February of 2022.
But higher rents could conversely push many Americans to pull the trigger on buying a home, according to a recent article in Barron’s.
“The fact that rents are rising is an important push factor that might keep potential homebuyers motivated even though home prices and mortgage rates are both going up, ” said Danielle Hale, chief economist of Realtor.com. “Because the monthly housing costs are going up, whether you are looking to rent or buy.”
And like ripples in a pond, Rising interest rates may also mean that builders are likely to build less because fewer people can afford a new home when borrowing rates are higher, said Taylor Marr, deputy chief economist at Redfin, told the Wall Street Journal.
“I think we’re in a really tough spot now with the outlook for new construction,” said Marr.