Real estate buying rates are lower this upcoming year, but rental real estate is a completely different matter. With a large portion of real estate being in rentals alone, having a stable rental market is important. Rental real estate is at an all-time high, where buying rates are remaining steady.
In the last year, more than 378,000 apartment rentals began construction, and of that number a large portion of those built are considered luxury apartments. In New York alone, 30,000 new apartments will be finished in 2017. Of those, roughly 85% are considered luxury apartments. That means that the average new apartment rental’s income needs to be around 75K. This is leading to massive imbalance of new rentals, with high end apartment rental rates staying about the same or slightly decreasing in price, and lower income apartments soaring with little new apartments to rent in the lower to middle income class being built. As of right now, rental places are in high demand, with no sign of supply being able to grow and meet that demand, as most new construction are not focused on adding new medium priced rental apartments. And, landlords are not doing anything differently than they had in previous years, with most landlord’s raising the rent of their units in the last year. With a flood of luxury apartments hitting the market, luxury apartments will have to lower their prices for the first few years, giving the market time to even out. For those in middle income or lower income housing, their rental price will most likely continue to raise over the next few years as supply slowly increases to meet with the demands of the area.
For most renters in the lower income to middle income class, buying a home just simply isn’t an option. Until a good portion of these luxury apartments are finished, rental growth is on an increase. With mortgage rates being as low as they are today for a 20 to 30 year loan, buying is the best option.