The Rent Burden

[Exile]

Today's "Yahoo! News" features an article called "Renters squeezed by housing shortage("http://news.yahoo.com/s/ap/20070914/ap_on_bi_ge/renters__plight") . It states that increasing rents and lack of affordable housing in the U.S. are causing tenants more grief than the fallout from the mortgage crisis is having on homebuyers.

If you are facing a drastic increase in rent or other housing problems as a tenant, how are you handling the situation?

[cschin4]

I would think that if home prices are falling then renters would be fine. To attract renters, it needs to be reasonably priced, otherwise the renters could just buy a home for what their monthly payment is.

[jodi]

I would have to disagree with the pp for two reasons: if the foreclosure rate is increasing so much (which it seems to be doing more in high cost areas of living due to inflated house prices), then there will be more competition for rentals. More competition = higher prices. Second, a large percentage of people who rent do so because they cannot get mortgages (bad credit, sporadic income, etc), do not want one (i.e. might be living in the area temporarily), or have already defaulted on their existing mortgage and are being forced into the rental market - so they might not be able to just go out and buy a home if the rental market gets too expensive.
That being said, I have no personal experience with the current rental market, although our house prices never got too out of control here, so I don't think we will see a whole lot of fallout.

[skydivingchic]

I live in San Diego and we bought our condo a little over 5 years ago. Both the rental and housing markets were absolutely insane. When we bought, our rent was only a few hundred less than our new mortgage payment (which included taxes and PMI). The same unit we were renting has now surpassed our mortgage payment.

Our problem was that the housing prices were going up so quickly (15-20%+) per year, that there was simply no way to save money fast enough to come up with a decent down payment. At the time, a condo in a decent neighborhood (not a new condo, not anything fancy) was at least $250,000 to $300,000. That makes a 20% down payment $50,000 - $60,000.

We ended up finding a low down payment loan (otherwise conventional, fixed rate) and paying the PMI for 1 year. After that we were able to refinance with 20% equity and drop the interest rate a bit.

Because housing prices are still so outrageous in this area (they have gone down some, but still have 2 engineer DINKs questioning how people can possibly afford these houses), a lot of apartment complexes are doing condo conversions, further tightening the rental market. The rental property vacany rate in San Diego is extremely low already, so the condo conversions are only going to worsen that issue and further drive up rents.