How Higher Rent Has Supported Housing Prices

Filed under: Temecula Real Estate

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In today’s video, we are talking about current home prices in the Temecula Valley. In past videos, we’ve talked about the record high price of homes in 2008 and how home prices have slowly been approaching those high values again. Now, in some neighborhoods, home prices have already exceeded their 2008 values, while other neighborhoods are very close to it.

Marketing Dynamics in Real Estate

Some have speculated that because prices are now at the same level as they were in 2008, we should be worried about another price correction in the housing market. However, there are some different market dynamics in play that were not there even just a few years ago.

What is different now, than even a couple of years ago as we were still approaching the highs? Rental prices have dramatically increased. I view this as a bottom support for current housing prices. Because rents are at a certain level and are still increasing, it gives support to housing prices to remain where they are. If people are willing to pay more for a rental property, then landlords can afford more expensive mortgages on these investment properties. The market seeks its own equilibrium between what renters will pay and what landlords and the market can charge.

How Loans Impact Rent

Combine higher rent prices with the fact that we still mostly have fully amortized loans out in the marketplace. Lenders are much more discerning about who they are willing to loan their money to. If you have gotten a mortgage in the last couple of years, you know it’s not easy to qualify for one since the requirements are much more rigorous than they were before the last market correction. The strict financing and rising rents provide some real support for current home prices.

Nonetheless, it is interesting to note that we’re now seeing prices reach and even exceed those all-time highs that we experienced in 2008 before the market fell.  If you’re interested in discussing today’s housing market a bit more in-depth, feel free to call or text me: (951) 473-0390. You can also email me at [email protected] if preferred.