Bad news for landlords, good news for tenants: Apartment vacancies have reached a 23-year high, driving rents down.
If you’ve debated renting versus buying a home, it might make sense to revisit the calculations, with special attention to the prospective renter’s stronger negotiating position.
Not only can you haggle for a lower rent, you may be able to negotiate when your lease ends, how much deposit you put down or how much sprucing up the landlord does before you move in.
Reis Inc. (Stock Quote: REIS), a New York real estate research firm, says the national vacancy rate rose to 7.8% this summer and could go higher. Rents have fallen by 2.7% during the past year.
At first glance, a rising vacancy rate may seem surprising during a recession, when unemployment and home foreclosures might be expected to turn more homeowners into renters. Tougher lending standards are also making it harder for renters to buy.
But many people in financial straits are apparently sharing housing or moving in with family members rather than renting apartments of their own. Some markets have a glut of rentals built a few years ago during the housing boom, and many unsold condos are being converted to apartments, helping supply outpace demand.
Of course, housing prices have fallen, and many renters may feel this is a good time to buy, especially as mortgage rates are very low. The average 30-year fixed-rate mortgage charges just 5.051%, down from 5.261% a week ago, according to the BankingMyWay.com Survey. Use the Maximum Mortgage Calculator to see how much you can borrow.
Because the housing market is still shaky, it probably doesn’t make sense to buy unless you plan to stay put for seven, eight or even 10 years. If you expect to move in three or four, there’s more risk your home’s sale price won’t be high enough to pay off the old loan and cover all the costs of selling, such as transfer tax and a real estate agent’s commission.