Rents are falling, more pressure on the housing market
Thursday, May 21st, 2009Apartment rents are falling around the country as reported by Calculated Risk via a Goldman Sachs REIT paper. Falling apartment rents usually result in downward pressure on the residential housing market as lower apartment rents will draw more renters away from resedential homes. The lower apartment rents will force landlords to match or lower their rental prices to compete with the apartments.
As noted by Calculated Risk lower rents will bring lower home prices as the house price to rent ratio will near the more historic level of 1.0-1.1. So while home prices are falling and nearing a more even 1.o mortgage payment to rent payment, falling rents could cause home prices to drop even more. If this happens look for even more foreclosures as landlords can’t afford the mortgage payments.