Where have all the houses gone?
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âI don’t think we’ve seen a housing market quite like this,â said Jenny Schuetz, a researcher at the Brookings Institution. “And other recessions looked a bit different, making it hard to know what’s going on.”
As the real estate crash approached, house prices rose much faster than rents, meaning many homes were selling for prices that landlords couldn’t afford if they had to rent them. Then, after the crisis, house prices fell in some markets as rents rose, with newly foreclosed landlords pouring into the rental market.
Today, rents have fallen for reasons largely inseparable from the pandemic. The laid-off workers had to double down with family and friends. Students who normally rent near campus have been at home instead. Some tenants attracted by the low interest rates have successfully purchased a home. And the normal influx of new tenants to cities – recent college graduates, immigrants, workers who have just landed new jobs – has declined during the pandemic.
Recent research by Arpit Gupta at NYU and colleagues suggests that rents have fallen the most in nearby urban neighborhoods. These are also the places where it just doesn’t make sense in a pandemic to pay higher rent to be near restaurants, bars, museums and downtown offices. This followed another unusual pattern: Single-family rentals behave much more like owner-occupied homes (in high demand), while condos are more like rentals (with low appeal).
These unusual circumstances in the rental market make it all the more difficult to take into account what is happening on the landlord side. The ratio of house prices to rents in many subways is now as high as it has been since the housing bubble – but it has increased during the pandemic in part because rents have fallen, not just because prices have skyrocketed.
Mr Zandi, at Moody’s, said he was not yet worried about a looming disaster like the latest real estate bubble. But he says it’s already worrying that the price hike has excluded many first-time, moderate-income homebuyers, who could for years lose the benefits of freezing interest rates below $ 3. %.
âI don’t think these are red flares; I think they are yellow flares, âZandi said. “But if we have another year like last year, we’re going to have a lot of red rockets.”
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