Why are rental prices for single-family homes soaring?
Ask anyone who is trying to buy a home these days, and you’ll hear it’s really hard. This is in part due to a lack of inventory, but also to competitive mortgage rates which are fueling buyer demand and driving up home prices.
But it’s not just homes available for purchase that are skyrocketing in prices. Rent prices for single-family homes are also on the rise, and if this trend continues, it could put a strain on many household budgets.
Why are rents going up?
Rents for single-family homes rose 5.3% in April 2021 from the previous April, reports CoreLogic. This is the largest year-over-year increase in almost 15 years.
Why are rental prices going up for single-family homes? This is probably due in part to an increase in demand.
For many families, single-family homes have become more attractive than homes in multi-unit buildings during the pandemic. Renting a single family home has given people more room to spread out. And over the past year, that has also meant not having to share an elevator, laundry room, or other common areas with other tenants during a massive health crisis.
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And as mentioned above, home values have increased overall, so homeowners could face higher property taxes. As such, they may seek to pass these costs on to their tenants.
It should also be remembered that many homeowners have seen their income decline over the past year or more due to the eviction ban in effect since the start of the pandemic. Landlords can increase rental prices to compensate for this loss of income.
Can you afford a rent increase?
If you are renting a single-family home or looking to do so, it’s important not to get confused. As a general rule, you shouldn’t spend more than 30% of your take-home pay on monthly rent.
Now there are a few exceptions to this rule. If you live in an area where house prices and rents are always inflated, such as New York City, you may need to spend a higher percentage of your income on rent. But in cities like New York, you could also get by without having a car, so lower transportation costs could help offset the higher housing costs.
But in general, sticking to that 30% threshold is a good idea. So if you are looking for a new single family rental, you may want to give yourself plenty of time to find affordable options. And if you’re already renting a single-family home and your landlord advises you of a rent increase, try pushing back. If you’ve been a tenant in good standing for a while, you may be able to convince a landlord to leave your rent as it is or impose a smaller increase instead.
The housing market today is pretty crazy, and many buyers are taking the upper hand by taking out mortgages that they cannot afford. Do yourself a favor and don’t make the same mistake by renting a house well outside your financial comfort zone.
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