Skyrocketing Rents Begin to Fizzle (not as much as you may think)

RISMEDIA, Friday, February 03, 2017:

Skyrocketing rents will begin to fizzle in 2017, driven by a multifamily market marked by less starts and oversupply, according to the Freddie Mac Multifamily Research Group's 2017 Multifamily Outlook.

"Demand for rental units is at a historic high due to demographic changes and lifestyle preferences, but increasing new supply and other factors are likely to moderate multifamily market growth in 2017," says Steve Guggenmos, Freddie Mac Multifamily vice president of Research and Modeling. "In particular, landlords are likely to pull back on rent increases as new supply enters the market and vacancy rates rise."

Rents are expected to grow at their 2016 pace; vacancy rates are expected to reach 5 percent for the first time since 2011.

 For more information go to: http://www.freddiemac.com/

A Local Perspective by: Dominick Leone

Northern Ocean County in New Jersey is still reeling from the effects of Super Storm Sandy, not just destroying homes but peoples credit and lives in general. Just after the storm, there was an unprecedented rush to locate rental housing for the storms victims who were left homeless. Years later, those who lost their homes, started to suffer financial hardships while trying to untangle the FEMA paper-jam and insurance nightmares. It drove some people to just abandon their homes and move on. 

Banks and lending institutions, not being as liberal as they would like (especial local community banks) under the Dodd-Frank regulations, developed a new set of hurdles for homeowners to jump over. Those who abandoned there homes had foreclosures on record because, while paying rent, they couldn't afford to continue a mortgage as well and this became a massive burden on their credit scores. This carried on to owners of homes who ran out of government assistance waiting for their homes to be raised and rebuilt, also having the burden of rent and mortgage payments at the same time. 

I'm not saying that things aren't getting better, I'm saying that there are still people trying to dig themselves out of a tough situation and their FICO scores are suffering because of it. So, buying a home is not within reach as of yet for many of the people who lost it all in the storm. To add insult on top of injury, when your credit is damaged (regardless of circumstance), renting a home isn't easy ether.

With the inventory becoming depleted and credit scores dropping, the rent rates jumped to all time highs. Like I said before, things seem to be improving a little, but I don't see much of a decline in rent rates for 2017. 

Those who invested in distressed and "bargain" properties with a fix and hold (for rent) portfolio may be the smart ones, creating  an annuity plan with equity growth in the future paid by their tenants. Passive income, 26 year depreciation on the property with added capital improvement and business tax benefits seems like the the winning formula in the long term real estate game.