Real Estate Cycle Expected to Push Buyers Toward Renting

by Chicago Agent

As buyers hesitate to invest in a time when loans are hard to obtain and many homeowners are finding themselves underwater, rentals are becoming a desirable option.

The apartment and rental market is expected to heat up in the current buyers’ market, said AgentGenius.

In April, a report by the Harvard Joint Center for Housing Studies had revealed that rentals were rarely affordable, with affordability defined as below 30 percent of the household income.

A lack of inventory had also been created by the surplus of four million additional people renting in 2010, compared to 2005, likely causing the existing inventory to don high price tags.

Now, Agent Genius believes that building may take a hiatus (as loans for builders are also hard to obtain) vacancies will drop, and property listing-homeowners may find that offering their home as a rental will prove more successful. “This is simply a natural trend in the real estate cycle, but we don’t predict a major bubble,” said the article.

“Renting will put a hamper on Realtor commissions for a bit, but we believe that there will be a rising number of people that rent out of choice or fear rather than simply losing their home,” said Agent Genius.

Although foreclosures filings are dwindling, the current backlog is still discouraging as the majority of the US population personally knows at least one person facing foreclosure.

Another large issue, receiving plenty of criticism, is the proposed 20 percent QRM down payment; many lawmakers are working to get this rate lowered, but if it passes as is, many first-time homebuyers could be locked out. The proposal has been called “overly burdensome government dictate” and many worry that it would be “detrimental to the housing sector.”

As adjustments are made in the market, the inclination toward renting is expected to be a transitional period, with many buyers potentially seeking out homes in their current rental area once the market steadies. It is expected that the desire toward owning a home will return at some point in this “real estate cycle.”

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