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2016 Inflation & Rent News

2016 Inflation Rent News

If you’re on the fence about buying real estate right now, consider this news from a recent CNN article:

Experts project for next year that rents will rise faster than inflation, increasing approximately 3%-5% nationally.

This is not great news for renters, who already know we are currently in a rental affordability crisis. Over the past few years, demand for renting has risen, vacancy rates have decreased, and rent prices have soared.

When you have to pay a high monthly rent, saving for a house down payment and planning to become a homeowner can be very difficult. This, in turn, can force renters to stay in the rental market longer than they wish.

Experts say that rents will likely keep climbing in 2016, although they expect the pace will start to slow in certain places around the country. The large, trendy rental markets in the U.S. like New York City, Boston, and San Francisco will likely see rental prices plateau. Surrounding areas of those markets will see the higher prices, however, and thanks to spillover from those cities, and some renters will find those higher prices out of their reach.

For example, price gains in Oakland, located near San Francisco, are projected to outpace price gains next year in San Francisco. Cambridge, near Boston, is expected to see a major rise in rentals and rent prices thanks to renters looking for cheaper residences compared to Boston. Other cities where experts predict heavy rental growth include Miami, Dallas, Austin, and Houston.

Experts say that the new construction in 2016 that brings new rental units on the market will most likely not keep up with the mounting demand. It may take at least one year for supply to catch up to the demand, since there are such low vacancy rates in many locations. And since new inventory is often high-end, that factor will only hurt those already suffering from rental affordability.

It is also believed that rising mortgage rates could increase rent prices. If the Federal Reserve raises interest rates, like it is expected to next year (for the first time in 9 years), this could force renters to remain renting even longer. This is because higher interest rates increase borrowing costs, which shuts out potential buyers, and in turn, increases rent prices thanks to the rental market demand.

Because rent prices will keep climbing, it will be cheaper to buy than rent in most cities around the U.S. next year. Mortgages could get more expensive, experts say, but buying might still be the better option.

Contact Real Estate Ink, a full-service boutique real estate brokerage in Melbourne, FL, to learn more about how we can best help you with your real estate needs. We offer full service property solutions in Brevard County, including sales and leasing representation, property management, and project development.

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  1. Pingback: 2016: The Year Of Buying A Home | Real Estate Ink

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