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Rent for Single-Family Homes Surged 10% in October

Every single week I speak to someone on the phone that’s looking for a home to rent. They are frustrated because they can’t find any available homes, so they start calling real estate agents to see if they know anyone willing to rent their home. Sometimes they’re calling because the rental prices are so high that they’re now seriously considering buying a home. Unfortunately, too many of them are not financially able to make that leap just yet. One young man I spoke with recently was really upset about the prices that landlords are charging, and I told him, “Sorry to be the bearer of bad news, but it’s not going to get better in the next few years.”

Throughout 2020, many renters were able to benefit from price reductions or even months of free rent as landlords struggled to fill empty units. But those concessions are gone, and landlords are hiking up prices as Covid-19 restrictions end and housing demand spikes.

Earlier this week I read an article from CNBC that said, “Rents for single-family homes increased 10.2% nationally in October year over year, up from a 2.6% rise in October of last year.” That’s a huge increase, but it’s simple Economics 101 – low inventory and high demand creates rising prices. That same article went on to say some markets in the U.S. are hotter than others.  Rent growth was strongest in Miami, with a stunning 25.7% year-over-year gain. Miami was followed by Phoenix and Las Vegas at 19.8% and 15.9%, respectively. Austin, Texas, and San Diego rounded out the top five markets for rent growth.

Rent is surging for a number of reasons, including more certainty in the job market and young people moving out on their own as pandemic restrictions end. Many people left cities and others moved in with family members in 2020, but that’s reversing now. People have a lot more confidence in the economy and that’s putting a lot of demand on things all at once. These rising prices will likely leave millions of Americans spending more than 30% of their monthly income on rent.

Another result of all this is investors are now flooding into the real estate market again. Inflation is on the rise, and most investors view rental homes as an inflation hedge. Several homes that my team has recently sold have been bought by investors, some local and some larger national investment firms. Meanwhile first-time homebuyers, who historically make up about 40% of home sales, were at just 29% so far this year, the lowest level in more than a decade. Most of this reason is because these first-time home buyers don’t have enough cash down to compete with the investors who typically have 20% down or all cash for their home purchase. Sellers will almost always choose the buyer with more cash as they tend to be a more qualified buyer.

Believe it or not, by comparison to many parts of the country, Kansas City still has very affordable housing. It’s not uncommon at all for me to get several calls per month from people living in other cities that are considering moving to Kansas City because of our low cost of living. Most of them have jobs that will easily allow them to transfer to the Midwest and a large percentage of them have employers that now allow them to work remotely, post-pandemic.

If you or someone you know is thinking about buying an investment property in the greater Kansas City area, call me (816) 651-9001 or one of my experienced team members. We can sit down with you and explain all your options for investing in real estate. It can be an excellent investment opportunity right now. We can set you up with a great lender and even introduce you to a rental management company if you don’t have the time to manage it yourself. Let the renters pay down your mortgage while you benefit from an increase in the home’s value over the years.

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