If you’ve ever had to take out a payday loan to make rent on time, you know how tough it can be to pay for housing. Attention has been on homeowners and mortgages during this financial crisis, but what about renters?
Americans just aren't willing to pay what they used to for rent.
Rent has been rising steadily since 2003. But, as of the fourth quarter of 2008, that is no longer the case. Instead of continuing the upward trend, rent fell .4 percent over the past three months.
Everything but the sky is falling
Prices on pretty much everything have taken a hit. Gas prices are fluctuating, but they are down a hefty percentage from their July peak. Retailers are slashing prices on clothing and electronics to attract customers. Home prices have been falling since December 2007, when the recession started. But all that time, rent continued to go up. Until now.
This drop in rent doesn’t just apply to apartments. Office rent fell even more, a 1.2 percent drop. As businesses downsized or closed up shop, more vacancies caused office space owners to lower their rent.
Where is everybody?
Vacancies drove the drop in apartment rental prices, too. The vacancy rate at the end of the year was 6.6 percent, compared to 5.7 percent at the same time last year. I guess people chose to move out rather than get a payday loan to pay their rent.
This causes me to question: With all the recent foreclosures, plus the higher vacancy rate in rentals, where is everyone living? Back with the parents? Uncle Ned? Has everyone gone back to having roommates, college-student style? If you have an experience or know someone who lost a home or vacated their apartment, please share.
In Chicago, ex-renters who run out of relatives to stay with are turning up at homeless shelters.
Rent discounts go south
In Arizona, following a law banning businesses from hiring illegal immigrants, the situation is even more extreme. In Tucson, average vacancy is 12 to 13 percent, and some areas have vacancies of up to 25 percent.
Creating competition
Property owners are offering up to three months free, TucsonCitizen.com reports. One Tucson tenant who moved after he saw discounts advertised says that he saved $1,000.
The changing housing market has created another interesting phenomenon. People who were trying to sell their homes, and failed, have turned to renting out their property. This has created a glut of houses available for rent, which is driving down the price of renting a house. Because of this trend, the price of renting a house is more competitive with the price of renting an apartment.
Waiting it out
It remains to be seen whether the lower rental rates will cause fewer vacancies or whether rent will have to drop even more before people are willing or able to pay for it. Many analysts and experts have predicted that the current recession will last until the third or fourth quarter of 2009. That would make this the longest recession since World War II.
So it looks as though we’re stuck for a while. It’s time to buckle down and figure out how to react to a recession. This money blog article talks about whether a payday loan is a good idea during a recession.
It would be interesting to get follow ups on the renting problems hitting the country at this time.
I guess it has a good side and a bad side. Low rent would be nice especially for people who live in places like California. On the other hand, there are so many other things people are going through at this time; decreased monthly rent will not cover the difference. For instance, how can someone afford rent when they don’t have money in the first place? The unemployment rate is still on the rise and it’s hard to tell how much worse the economy will get until we’ve made a significant recovery.