Flattened Rent Rates Could Lessen Housing Demand

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April 21, 2017

Rents rose only 0.7 percent last month, the slowest pace in more than four years.

Svenja Gudell, the chief economist at Zillow, writes that the flattened rents could lessen the demand for single-family homes.

The idea is that many renters chose to buy a house, which has fixed monthly payments, rather than deal with ever-increasing rent prices. But, more consistent rent rates could cause renters to slow down and wait to transition into homeownership. Fewer potential buyers will lessen demand, and homes may stay on the market a bit longer and slow the growth of home values.

Gudell writes that stagnant rents could also encourage more single-family and for-sale development.

Rising mortgage rates and continued home value appreciation won’t entirely erase the financial advantages of owning over renting, but the gap can be expected to get noticeably narrower.

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