Renters will fuel a housing recovery

This past week our listings saw an average of 1.9 showings each.   We are coming into a holiday weekend so it is widely expected that traffic will be slow at least for the next few days.   Prices are still down but things appear to be holding steady for the time being.

While the real estate sales market continues on a very slow recovery I am witnessing a residential rental market like no other that I’ve every seen.   In the nearly 10 years I’ve been involved with investment real estate, I’ve never seen a rental market as HOT as it is right now.  

Although I only have a few rental properties that I’m involved with at any given time, I’ve had a handful with leases that have come to and end recently.   In every case in seeking new leases, I have been completely overwhelmed with phone calls both from prospective tenants and from agents representing tenants.   In every case, we received multiple calls per day on each property.   And in every case, we received multiple rental applications.   The landlords that we dealt with all had their pick of well qualified tenants that were fighting over the space.   This  has  truly been amazing.

If you stop to think about it, it makes perfect sense.   For several years now, the number of foreclosures has increased.   In addition to that, lenders have  tightened their lending guidelines.   Then on top of all that, people are scared of real estate because of decreasing prices over the past couple years.   This means that their are fewer people buying and a huge surge in renters.   Everyone has to live somewhere.   By the way, due to  the increase in the number of renters and a supply that isn’t quite keeping up, rental rates are on the rise.

I feel so strongly that the rental market will fuel the sales market that I not saying it as a  prediction.   I think its a fact.

In Charlotte, we truly have reached a point in most parts of the city where it is cheaper to buy than it is to rent.   My good friend and frequent guest blogger, Rob, suggested to me almost a year ago that this would be the turning point for real estate.   Now that I’ve seen this surge in rental real estate, I agree with him 100%.

I have no doubt that soon enough it will become widely known that real estate is back to being a good investment purely from a cash standpoint.   If you can buy a home and rent it for more than it costs to carry, a positive cash flow occurs.   Now that’s a true investment.   Back in 2005-2006, speculators called themselves investors buying property on “speculation” that they would go up in value.   That’s not the case anymore.   Cash flow isn’t speculative, its smart.

As I’ve watched the markets operate since the crash in 2008, the more I’ve come to the realization that we are just experiencing normal market cycles.   It went up, it came crashing down.   Now, we are at a point where it is almost a no brainer to buy.   If you can rent your home for more than it would cost to buy it, how could prices go down much further.   As long as their is a profit to be made, someone  will be in line to  buy it.

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