Signs of a Housing Market Recovery?

It has always been my assumption that as the home sales market weakens for various reasons–interest rates, inflation or an economic recession–the rental market quickly strengthens. It just seemed like common sense; people may not be buying, but they will always need somewhere to live! But it was all just an assumption on my part, until the hard data that came out this week confirmed the theory.

Home prices have been continuing to fall, but new data shows the rental market is finally strengthening. Analysts are saying this could be an early indicator that housing on the whole may be headed into recovery.

Fueled mainly by the foreclosure crisis, we have seen the number of renters increase, many with less than perfect credit records; this slows their becoming homeowners again. Additionally, the current difficulties in getting a mortgage are adding to the number of renters.

Even with this added demand, inventory has stayed relatively constant, as many investors are buying up foreclosures and converting them to rentals. According to Zillow, median rents rose 3% from January 2011 to January 2012 nationally, while home prices declined 4.6% during the year.

So while it may take a bit more time for the housing market to recover, we know we can count on the rental market in the meantime–it’s become the dependable housing model for the 21st century.

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