You may have noticed lately that the Denver and Colorado Springs rental markets are approaching a level of hysteria unseen since the worst excesses of Beatlemania. Even as new apartment complexes spring up all over town, and downsizing Baby Boomers convert their old homes into rentals, demand continues to outstrip supply and rent prices just keep increasing. It won’t be long before “For Rent” signs are chased down by the same kinds of shrieking, shaking, crying mobs that used to greet the Beatles at airports. The state of our rental market can be either a curse or a blessing, and on this week’s show we discussed how to make sure you’re on the right side of the rental equation.
It has been true for several years now that renting a piece of property is more expensive than owning it. In 2008, house values plummeted and interest rates collapsed, making both the up-front cost of buying and the long-term cost of borrowing relatively cheap. We thought that once property values regained their losses it would again be slightly more expensive to own a home than to rent one, but that hasn’t happened yet. House values are even starting to exceed their 2007 highs, but the cost of renting has increased even faster while interest rates have remained historically low.
Millennials seem largely uninterested in owning homes right now and are instead seeking places to rent. Few property developers foresaw this, and it is taking time for a new supply of apartment complexes to reach the market. Even after the first new wave of complexes are filled, we may still find demand has not been fully met. An improving economy means Millennials who have been living at home the last several years—and there are millions of them!—are now financially secure enough to move out on their own. It is difficult to gauge how many will be entering the rental market and when they will make the leap, so we may find supply is extremely thin for several years.
Homeowners have seen an opportunity here and have jumped in to fill the void, turning their departing residences into rental properties when they downsize, upsize, or move away altogether. Rather than sell their old home, they keep it, refinance it to a low rate, and rent it out. Many are finding they can net a few hundred dollars right from the beginning. They not only have someone else paying down the mortgage on their property but are making a monthly profit in the process! Anyone with rental space to lease out is positively raving about the current state of the rental market. If, however, you’re still renting your living space, you may be raging! Rent keeps increasing, landlords are refusing to renew leases because of better offers, and it’s becoming increasingly difficult to feel financially stable and secure. If this were me, I’d be raging, too.
This is why it’s imperative to become a homeowner as quickly as possible. You’ll not only be paying your own mortgage and building your own home’s equity, but you’ll have the financial security of knowing exactly what your monthly housing expense will be for the next 15-30 years. Each week I hear from more and more listeners who are tired of renting and are ready to finally purchase a home of their own. If you’ve been entertaining the idea of becoming a homeowner yourself, give me a call to find out whether you’re ready to start shopping or to make a game-plan to get you in the market as soon as possible.