Everyone knows that property values have bounced back a bit since “The Great Recession of 2008”, but what about rental rates on single family homes … what are they doing? Have they gone up?
First, let me say that most rents NEVER WENT DOWN here in Pierce County! This is one of the few bright spots in the dark economic storm of the last 7 years that we have endured … and THAT says something of the durability of real estate as an investment.
Every year at Red Roof Rentals we take time to research current fair market rental rates using market data from Craigslist and from our own office files of closed successful transactions. The results show an average 8% RENT INCREASE in the last 24 month period (Nov. 2013 – Nov. 2015), as follows:
|Sq Ft||Est. RENT
In an earlier study covering 2011-2013, only the “lower end” of the market (800-1400 sq ft) enjoyed increasing rents, the rents on larger homes remained flat in that period.
Today we find that the economy has improved compared to 2011 and, according to our chart, RENTS ARE UP across the board. Why is this?
The answer comes from the only thing that I remember from my high school Econ 101 class:
INCREASED DEMAND + LIMITED SUPPLY = HIGHER RENTS
Construction of new rental units all but stopped from 2008 until just recently, leaving an inadequate supply of rentals. At the same time the demand for rental housing has increased, partly due to the following:
- A younger generation choosing the freedom of renting over home ownership;
- Retired baby boomers that have sold their homes, also seeking rental life;
- Seattle workers that have realized that for the cost of a 45 minute express bus fare they can rent in Tacoma at half price and commute to their high paying job in the Emerald City!
More people chasing after fewer rentals … I think you get the picture!
All this is very good news for rental property owners who took such an equity beating back in 2008, losing 30-40% of their rental property’s value. But today, market values have bounced back, erasing most, and in some cases ALL, of equity lost … and rental rates are increasing as well.
Real estate has its ups and downs, but in the long run the trend for values, both market and rental, just keeps going up!