The Housing Market Crisis: Renters In The Cross-Hairs Next

Increases in rental prices in many parts of the United States are giving thousands of Americans a pretty nasty wake-up call. Renters who previously were able to ride out housing market declines relatively unscathed are now being confronted with the bad news related to corrections taking place in the real estate market.During the course of last year the rental market quietly transitioned from a tenant’s market to one that has become a distinct landlord’s one. This is according to Chris Herbert, who heads up research at Harvard’s Joint Center for Housing Studies. The availability of rental properties is becoming limited and vacancy numbers are in decline, giving landlord’s an upper hand when it comes to increasing the rental rates of their properties.On a nationwide scale, rental prices are expected to increase by 5% during the course of 2011, with a further 5% increase occurring in 2012. Escalations like this place a significantly greater burden on the shoulders of most average Americans. This trend of rent increasing is not expected to stable out until some time in 2013, as new multifamily properties are constructed which will enhance the supply of rental real estate and hopefully attract the attention of would-be renters. These forecasts are attributed to the VP of research and analysis at MPF Research.In the yearly State of the Nation report released just a few days ago, the Harvard Center stated that escalating rents and increasing costs associated with owning a home are leaving Americans across all demographics with no choice other than to commit a larger percentage of their earnings to securing a roof over their heads. In 2009, in excess of 19 million households funneled more than 50% of their income into housing expenditures. That in itself is a pretty staggering statistic. More than half of those households represented renters.Renters generally expect increases in rent over time to be a natural part of the rental process. However, it’s the scale of these increases that is unprecedented and that is sounding the alarm with many renters who are in search of long-term, sustainable strategies for securing quality housing. The stability of a household and the choice of whether or not to move is directly impacted by its ability to cope with rental increases.From the point of view of landlords, the marketplace is in quite a lovely shape. Nationwide apartment operators have amended their predictions for this year in the last few weeks, expressing an expectation of a robust market which will allow for higher than normal rent increases. That’s great news for landlords, but on the flip-side of the coin are the renters who are being called upon to carry an increasingly heavy financial load in the midst of a severe economic recession.It is becoming increasingly important for renters to engage in constructive and proactive negotiation with their landlords in an attempt to arrive at a compromise that remains mutually satisfying for both parties – this is the case in most areas in the USA because only few cities (such as San Francisco and New York may have rental regulations). Also, tenants who are confident of their desire to continue renting a particular property for a number of years would do well to obtain a multi-year lease that facilitates the arrangement of a locked-in rental agreement that remains constant over the term of the lease. Effective negotiation skills on the part of renters is becoming more important and more valuable.Renters may find that some tenacity and boldness is called for in the course of these negotiations, but the alternative is to accept whatever terms are presented by a landlord. Clearly this approach is often not in the best of interest of the renter.One has to wonder where the rental market is headed (further research is clearly needed) and economists still advocating against buying have to start new comparison methods because the name of the game has now shifted. Further questions and analysis into the state of the “housing market umbrella” as a whole and its impact on the quality of life in the US are very much needed.
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