What is going on with rental prices?

Most likely it has to do with the area I live in, but holy hell, what people are asking for rent is ridiculous. 

The wife and I have decided it’s time to move. The Rent to Own situation we are in isn’t working out for several reasons, so we are back to looking for a rental. 

The average price for a 2-3 bed home for rent seems to be about $1900 a month. On top of it, a lot of these houses are owned by leasing companies who want top tier credit and want to make sure that your income is three times of what the rent is. Prices however are over $2000 in several areas that we have looked and it’s just not feasible. 

There are a few affordable houses that have popped up, but they’re gone almost as fast as they’re posted. 

We currently live 60 miles south of Chicago and need to stay in the area for my wife’s job, so it looks like we’re just going to have to wait for the right place to pop up. 

They’re probably tracking real estate values.  I’ve been looking at houses in a few areas out west for a while, and they had been steadily rising, but in the last year, asking prices seem to have gone vertical.

Housing demand is way up. When people can't find affordable homes to buy, they rent, and that increases demand for rentals. When real estate investors buy expensive properties because the market is up, they charge more in rent to make the numbers work. This also contributes to increasing rents.

If you rent, you're at the mercy of the landlord. When the landlord is a large corporation, you can count on corporate profits always being prioritized. "Whatever the market will bear" seems to be a common mentality as everybody tries to get a bigger piece of the pie.

Wow on those prices! Have you run the numbers on short term purchase vs renting?

As a homeowner and potential landlord, those prices do not seem high at all.  And I live where the cost of living is cheap cheap cheap.

Landlords buy houses to rent them because they want a good investment.  Its silly to drop rent so low that their money can earn more elsewhere.

The house right next door to me is for sale, should be less than 1800 for monthly mortgage + insurance.

Just saying!

What is going on with rental prices? 

They are losing their berkeleying minds. Stuff is nuts, everywhere. The place we rented when we first got married (1 bed 1 bath, slum neighborhood) is double what we were paying nearly 5 years ago. The house I was in before that with some buddies was $1100, last I looked they were asking $2300, currently occupied. Just nuts.

Robbie said:

The house right next door to me is for sale, should be less than 1800 for monthly mortgage + insurance.

Just saying!

Exactly.  You get to pay $1800 for mortgage + insurance.  Add in the fact that you tie up some cash (20% down) and maintenance (which is a huge number), and you can see why the actual cost to own something like that is significantly more.

If you are renting, you are paying the above numbers plus some return on investment for the landlord.  Suddenly $2000/month for rent doesn't seem so crazy.

In reply to ProDarwin :

And don't forget that the loan rate on a house you live in is going to be significantly lower than a house you buy to rent out.  More cost to the landlord that they need to recover.

But for real. Housing is up right now, and in most cities it seems awfully "bubble-like". I just sold as part of my move. I got asking price in less than 8 hours and I was worried I asked too high. So my plan is to rent for a year or so until the market calms back down and sit on my old house's equity until I find what I want.

Note to self: become a landlord

Market forces is the answer but also people who own rentals are seriously afraid of some form of rent control happening, they are loosing income as short term rentals are banned in some cities and tax rules are changing for write-offs. Plus REITs are taking over.

Remember people like me are out buying things in cities that are rebounding and we can only get say 85% active rental time in some areas and it needs to be taken into account. Also rates are creeping up right now especially on rentals and multifamily.

In my little corner of Atlanta (an area "in transition") rent is high because there is just not anything available. Our occupancy rate is something over 85%. One apartment complex in our city was already bought as an investment by a company that dumped a few million into renovations and raised the rents. The place has almost zero vacancies even at the higher rates.

I'm landlord to my in-laws two rental houses and we haven't raised rent in years because we finally have good renters. The houses are paid for, but maintenance still hits us a few times a year. Trying to get up to "market rate" is something we aren't interested in because we've had too many crappy renters who cost us thousands in repairs after they move out (or get evicted).

ProDarwin said:

Robbie said:

The house right next door to me is for sale, should be less than 1800 for monthly mortgage + insurance.

Just saying!

Exactly.  You get to pay $1800 for mortgage + insurance.  Add in the fact that you tie up some cash (20% down) and maintenance (which is a huge number), and you can see why the actual cost to own something like that is significantly more.

If you are renting, you are paying the above numbers plus some return on investment for the landlord.  Suddenly $2000/month for rent doesn't seem so crazy.

To be clear, by mortgage + insurance I meant mortgage + taxes, but I guess insurance is part of it too. I was just saying that a fellow GRMer could come move in next to me for sub $2000/mo. and WHO wouldn't want that???? haha.

I pay 1700 in rent here in Texas. I was paying 1900 in California (way more house and garage). Rent is expensive and nothing that I would WANT to buy is available where I would WANT to live. So, I'll sit and rent until I find something.

It's still cheaper for me to own. Maintenance is negligible, as I can do almost anything on my own. Anything else, I got a guy. What house rent goes for around here, I can own a modest home (800-1,200sq ft) for for about what a 2 bedroom apartment goes for. 

Congratulations. You've just discovered why the whole "van life" thing is becoming a... thing.

In reply to Appleseed :

That assumes you can find one to buy. In a lot of markets, those properties listings are thin.

My rent is way low compared to some if the houses that are for rent around us. Like almost half. I'm going the landlord is just happy to have good renters in the house and won't try to raise it in us anytime soon. 

Ian F said:

In reply to Appleseed :

That assumes you can find one to buy. In a lot of markets, those properties listings are thin.

That's correct.  It is thin. Very thin. 

Ian F said:

Congratulations. You've just discovered why the whole "van life" thing is becoming a... thing.

And not just in a van down by the river either.

In reply to SyntheticBlinkerFluid :

How quick people forget.  In 2006-7 the market was roaring along. When the bubble burst.  As a result tens of millions of homes went underwater and were foreclosed on.  Most of that group lost everything and had to settle for renting since their credit and any equity is gone. 

Meanwhile those coming up behind with massive student loans to repay were also forced into renting situations. They moved into a miserable job market as America and the world slowly worked their way out of the morass of the Great Recession.  Technically the Recession was over by 2010 but it sure didn’t feel like it as rents increased because of demand. 

Those who took a chance and bought at the bottom of the market profited while the  Wait-and-See people slowly lost the opportunity. 

Having watched their rent get higher and higher with no end in sight . They are now desperate to buy driving prices up.  Higher prices mean higher rents and the spiral continues.  

Meanwhile a trade war will do what trade wars have always done which is slow down economies.  The employment market is just now starting to offer slightly higher wages to offset the mortgage inflation. However instead of at the entry level they are offering those higher wages to in demand Skills and experience.  

Meanwhile without the cheap influx of migrant workers entry level jobs are going unfilled further putting the brakes on the economy. 

Some grades and types of imported Steel and Aluminum only Overseas made  are suddenly Significantly higher!  Putting a price pinch on American production.  Add the threat of 25% higher costs on Foreign made cars and parts, is it any wonder that  forcasts for the future aren’t rosey?  

Something I found out recently: When you sign a year's lease, even if you give notice, and do the right thing at say, 9 months in, you are extremely likely to be sued for the remainder of the 12 month lease. Used to be, you lost your deposit, and that was it. Brave New World.

wheelsmithy:  Unless something has changed, you're on the hook for the rent for the months that you didn't live there until the lease is up.  You shouldn't be sued if you keep paying OR until they rent out the unit.  Once it's rented you're done as it can't be rented out to two separate parties at the same time.   The landlord is also obligated to get it rented again ASAP.

The deposit is also gone but that's always been the case as well.   

ProDarwin said:

As a homeowner and potential landlord, those prices do not seem high at all.  And I live where the cost of living is cheap cheap cheap.

Landlords buy houses to rent them because they want a good investment.  Its silly to drop rent so low that their money can earn more elsewhere.

$2000 month rent for a house in the middle of nowhere seems INSANE. Assuming he's living in the city in his profile. 

I bought a completely, COMPLETELY renovated home (including a new roof, etc) with 0% down and mortgage/insurance/taxes is $1150/month in a 1.5 million person metro area. 

Didn't someone here just post a house for sale for like $150k that's not too far from downtown Chicago just a week or so ago?