So, in a housing market like the one we have had the last year or two; of record housing prices and growth, (like over 30% in one year in some areas), many of us wonder, ok, so what’s next? And now what should I do with my rental property? How are rents going to be affected?
It is no secret that the housing market has started showing signs of normalizing in many areas. Although it’s still a healthy sales market, Realtors are starting to report that the “Super Charged” market caused by the COVID-19 supply shortage, is actually starting to slow down and normalize. Instead of getting 10-20 offers at once, they are getting 1-3 on most listings. Dejan Eskic, a senior research fellow on housing at the University of Utah, has also said that he’s not expecting the market to fall in the next 6-12 months, and I agree. Indicators as Days on Market and interest rates are still at record lows. But, since we have hit the affordability threshold in some areas, as well as having fatigued buyers from all the chaos, we should continue to see a stabilization.
What does this chaos mean to rental owners?
So for us rental owners, what could this mean? The way I look at it is, over the next 12-24 months you will continue to see the rental rate “catch-up” that we have traditionally seen. Home prices go up, rent stays at a consistent and stable growth line, home values stabilize or even go down, rent stays at a consistent and stable growth line. This will continue on. Right now the jumps are higher and will continue that way as leases get renewed. This will continue until we break through the rental affordability threshold. We have already started seeing that in a lot of areas too. We are seeing multiple family units to try to find housing together, which creates other challenges. Affordable housing is always a topic on our agenda at the UAA Government Affairs Committee meetings and will be for some time.
Salt Lake City Housing Market
I think it’s a great time to start buying some investment properties in the Salt Lake market again as we see some slowing and rent rates catching up. Obviously, these are all signs of inflation, and you have seen it in other areas too, with prices starting to increase at a higher rate.
Super successful real estate investor and author, David Osborn said recently in a masterclass I was a part of: “The best way we know to hedge the risks of inflation is to buy real estate and hold it long-term.”
And David goes on to talk about the 120 plus homes he personally owns and how he has grown his wealth simply by not selling, even when the prices are high like in 2006. Now, you could have a property to exchange, but to cash out is not the answer. You can watch his full interview with Second Nature HERE. He talks about how he went from 1 to 120, how he finances them, partnerships, and all kinds of golden nuggets. I would start at minute 6 to jump right in and skip over some of the fluff.
So what do you think? Are you seeing the sales market stabilizing too? Are your rents starting to catch up? What’s your investment strategy? Are you looking to hold for continued wealth and maybe buy more? Or if you’re cashing out, I’d love to hear why and what your strategy is.