Rents are expensive right now, there is no question about that. In certain markets, prices are nearing all-time highs. Rent increases are severely affecting the monthly budget for a lot of Palatine renters. It makes sense that listed rents are rising given that they have increased by 15% nationally and up to 30% in some cities. Additionally, as many buyers are priced out of the housing market by inflation and rising interest rates, there is a growing pressure to rent. What then is the origin of this pattern? When will the cost of renting begin to decrease again? Here is a look at the current state of rental prices and the reasons why analysts predict a decrease in them soon.
Why is Rent So High?
Right now, a number of factors are raising rental costs. The pace of new construction is slow, the residential real estate market is fiercely competitive, there are fewer rentals available, and the effects of the eviction moratorium from the pandemic are still being felt. Let’s observe each aspect more closely.
Slow Pace of New Construction. For many years, the single-family housing market has been booming, but this expansion hasn’t resulted in the construction of many new apartment buildings. It is much more financially beneficial for developers to construct single-family homes or premium apartments than affordable housing. Because there aren’t enough new housing units to meet demand, the rental market has been tight for years.
High Home Prices. The state of the home buying market is an additional factor driving up rental costs. Many markets have experienced all-time high prices as a result of years of steady price growth. Prospective home buyers now find it more challenging to afford a home due to rising mortgage rates. As a result, more people are compelled to rent rather than buy, further increasing prices.
Fewer Available Rentals. Due to the combined effect of high demand and limited supply, there are fewer rental properties available on the market. The number of rentals that are available nationwide has decreased by 20% since 2019 according to a recent report from Apartment List. In certain markets, the quantity of available units has decreased even more.
The Eviction Moratorium. The moratorium on evictions is the final factor raising rents. It is now more challenging for Palatine property managers to evict non-paying tenants because of the moratorium that was put in place last year to protect tenants during the pandemic. Because of this, a lot of landlords are reluctant to rent to new tenants because they worry they won’t be able to make up their losses if the tenant doesn’t pay.
When Will Rent Start to Go Down?
You may be wondering when rental prices will begin to decline now that we’ve discussed the factors increasing rental prices. Unfortunately, it is tough to tell for certain. However, there are hints that the rental market may be about to slow down. One sign of a slowdown is in single-family home sales. This could result in more people staying in their current homes rather than moving, thereby reducing the demand for rental housing.
The fact that new apartment construction is finally starting to pick up is another indication that rents may begin to decline. Tax code changes that increase the profitability of renting out properties have contributed to this. Thus, even though it might take a while for these new apartments to go on the market, they should help alleviate the rental market’s limited supply and help keep rent prices in check.
There is therefore some hope that relief may be on the way if you are feeling the pinch of high rents. But to help you get by in the interim, create a careful budget and comparison shop for the best offers.
If you are looking for a better rental situation, contact Real Property Management Northwest Chicago Suburbs. We may be able to help you find a quality rental home you can afford. You can view our listings online.
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