A window of opportunity to get out from under surging rents?
The temptation to rent by recently retired or will soon retire residents is understandable. Who could blame them for being tempted by the opportunity to take advantage of all the equity they have built up. Renting is OK in some cases. But the longer an early retiree rents, the riskier it becomes.
When the pandemic raged, some locals decided on early retirement. Others were forced or enticed with buyouts. At that time, it was possible to rent for less than average mortgage payment. But the era of affordable rents is over in most cases. There’s a shortage of rentals, and rents are pacing and, in some cases, exceeding home price increases.
Some landlords bumped rents by double-digits. Others stayed just below the so-called market rate out-of-state investors were using. There’s been a surge in new apartment complexes development plans. And we’re seeing more build-to-rent single-family and townhome projects.
Regardless of whether you’re a retiree, soon-to-be retiree homeownership makes more sense than being a long-term renter. The reason is simple. Even with mortgage rates approaching the historical average of 7%, a mortgage payment can equal or be less than rent. And unlike rents, mortgage payments are fixed. The trick is catching the right opportunity is a changing market. Some think a window of opportunity will open for well-positioned buyers next year.
As interest rates increase and inventory becomes more plentiful home prices will begin stabilizing. We haven’t had a stable, balanced market of five to six months of inventory in the area NETAR monitors since 2018. Since then, things have increasingly shifted to favoring the seller side.
That begs the question. How long will it be before the market stabilizes and supply and demand are balanced? Although there are varied opinions, the truth is we’ll know it after it happens. That’s not a weasel-out-of-an-answer response – only a statement of reality.
Builders are getting new homes on the market as fast as they can. But new homes, condominiums, and townhomes are not a quick fix. It takes time to get new supply on the market. Inflation continued material price increases, supply-side issues, and the labor shortage are nibbling away at the extra buying power basement-level mortgage rates buyers used to have. Nibbling away means slow, downward pressure on home prices, which will put an equal amount of downward pressure on sales given current conditions.
Most housing experts think 2023 will be a year of continued turnover. Most of the media attention will be on metro areas where prices are and will continue decreasing. That hasn’t happened here. Prices have been flat for several months, but they’re not decreasing. They’re still at an all-time high for our market, which is well below the price of most metro markets. That points to another year when the area will see the surge of relocation buyers. There will also be ups and downs for both buyers and sellers. But since inventory is expected to show gains, it will make the market less competitive for buyers and an opportunity to get out from under today’s surging rents.
It’s a continuation of a market climate that rewards those with the best local market insights and a network of professionals that quickly and efficiently navigate the complexities of a transitioning market. Partnering and working with a professional local Realtor® is the best time and outcome-tested way to get that done.
NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in the Northeast Tennessee, Southwest Virginia region, representing over 1,600+ members and 100+ business partners involved in all aspects of the residential and commercial real estate industries. Weekly market reports and information for both consumers and members are available on the NETAR website at https://netar.us