For the most part, it looks like the country is on the road to recovery from the housing slump of the last few years. Unfortunately though, it doesn’t look like it’ll be a speedy recovery. Find out why this is (and why there’s actually an upside to a slow start) and learn about the role played by residential rentals.
Speedy isn’t necessarily what you want
Though millions of homeowners would like to see their home valuations jump back up to levels seen in previous years, that’s not likely to happen for a couple years yet. But believe it or not, that’s actually a good thing.
A quick jump up in real estate prices doesn’t mean stability. And if there’s anything homeowners want for their largest assets, it’s stability.
Instead, a positive sign of recovery is the slow but steady climb of numbers in real estate valuations. Slow and steady improvement within the housing market means a tremendous amount of growth spread out over thousands of houses – and thousands of homeowners.
This is currently the case for the residential rental market. Growth is slow, but stability is expected by the end of 2010.
Rental trends only slightly increasing
The Manhattan Rental Market report recently came out, with information on the rental market in 2010. It showed that 2009 had a less obvious seasonal rental trend than in previous years. They reported that the summer months saw a slight improvement over rates during the rest of the year, but that nothing was significant enough to denote a guaranteed jump in the rental market.
According to the report, employment is going to play a huge role in the success of the rental market. As employment levels improve, so should rental trends.
The Manhattan Rental Market report also stated that the new emphasis put on being frugal played a major role in pushing down rental rates. This was especially the case when it came to New York rentals with doormen – called “doorman properties.”
Landlords of these so-called doorman properties pushed rents down significantly and even threw in other renter incentives just to catch the attention of the new frugal shopper. Rents for doorman studios were pushed down the most with the average rates for 2009 dropping more than 8% from 2008 prices.
In contrast, non-doorman unit rental prices dropped as well, but only to rates around 6% less than in 2008.
Buyer’s market affecting renter’s market
Part of the reason the rentals market has tapered off is because of the growth in the buyer’s market. Low prices and buyer incentives, such as the federal government’s First Time Homebuyer’s Tax Credit, have steadily pushed up the numbers of first-time homebuyers. In turn, this move has steadily pushed down the numbers of residential renters.
Overall, improvement looms imminent
Analysts of the housing market are quick to point out that even with deflated numbers in the residential rental market, progress is still being made.
This is especially the case if you compare the first two weeks of 2010 to the first two weeks of 2009. That was when the stock market was falling steadily (and would for another two months) and housing prices had yet to tank further.
In contrast, the stock market is holding steady in some parts and growing in others now that we’ve fully entered 2010. Housing market numbers have started to level off. The jobless rate is also looking better – or at any rate, it’s not tanking on a monthly basis like it did a year ago.
The supply of rentals is surging
There is currently an enormous supply of residential rental properties on the market. Some of this is due to foreclosure and some is due to the fact that many would-be renters have moved on toward home ownership thanks to the incentive programs.
There is even a significant rise in vacant rental properties due to friends and families doubling up in houses in an effort to get through the hard economical times.
As the recession tapers off, this heavy supply will gradually diminish, but it’s bound to take some time. At any rate, it’s a relief to see there is no bad news on the horizon for renters. Just a call for patience.
