Current Market A Boon For Renters

More and more consumers are recognizing that at least for right now they are better of financially renting than buying. This is certainly a departure from the past when most consumers realized that the best financial option would be to buy rather than rent so that their money would go toward creating equity in a home.

However, this is no longer the case. In many locations rents continue to rise but people are finding even these elevated rents are cheaper than what they would pay on a monthly mortgage for a similar property. In some areas, renters are seeing savings of 40 to 50 percent by renting than buying.

One of the reasons for this is that in some locations, property values rose quite steeply. Today, buyers who snatched up those homes without blinking have discovered they must now sell. The problem? They need to sell the homes at the prices at which they purchased them two years ago to recoup the balance they owe on the mortgage. Renters just are not willing to pay more money than a home is worth.

Even renters who are able to qualify for mortgages just do not feel as though they are getting enough home for their money, especially when they can often rent a comparable or even larger home for less money.

As the result of conflicting motivations, experts are quick to point out that the market is neither a buyer’s or a seller’s market. Instead, it has become a renter’s market.

Renters are also holding off on buying because they don’t believe house prices have reached their lowest point. Their main concern is whether the home they purchase today will be worth what they pay for it six months from now. They feel it it much more prudent to pay rent for a few more months and see where the housing market will go before buying a home. Other renters are concerned about the upcoming hurricane season. Few people have forgotten the hurricane season of two years ago that devastated many homes. In those areas, homeowners, especially those without insurance, have yet to recover.

While some areas there is a deficit of rental properties, in others homeowners have recognized the prudency of waiting to sell their homes. They are reticent to sell their houses now when it seems wiser to wait and see when the market will stabilize or pick up. In some cases, homeowners are renting out their homes to the scads of renters waiting to take advantage of the opportunity. You even see rental signs on homes for sale. In these cases, renters accept the reality that the home must always be ready and available for showings, they still see the benefit of renting these homes as worth it.

Would-be investors who attempted to get in on the quick profit potential of flipping homes have also discovered that it makes more sense to rent out their properties right now instead of trying to selling them. In some cases, investors are discovering they simply do not have any other options when they must meet mortgage payments every month and are unable to sell their properties. In some cases, this means renting the properties at a loss, creating a negative cash flow.

The situation has become so much of a problem that landlords in some focused markets are having to slash their rents in order generate a small amount of cash flow. These investors are discovering it is far better to rent right away at a loss than to wait several months to find a renter willing to pay the amount they need. Even these upside down landlords are finding that renting them is the safest and least expensive option, at least for now.

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- Steven Lohrenz