Why Rents Are Rising

According to a recent article by Redfin, the average rent in the U.S. increased 14.1% year over year. Why are rents rising and when will these rents come back down?

1) We all know that we're experiencing the highest inflation rate we've seen in twenty years of 8.5%. This is a result of the Fed printing more and more dollars. In fact, 40% of the dollars in circulation have been printed in the last two years.

2) Demographics. Our nation is continuing to grow but our housing has not kept pace since the 2008 real estate crash.

3) Millennials and lack of buying opportunities for this generation. Many of them are at prime ages to settle down and purchase their first home. However, the challenge is that they're losing out on bidding wars to cash buyers and investors. This is causing them to enter back into the rental market, thereby increasing demand for a commodity that is already in short supply.

First time homebuyers only account for 27% of the home purchases right now, which is down from about 47% in 2010. On top of this, Huntsville was already in a growth mode with thousands of new jobs coming to the area. This is challenging because it's making it harder for renters to save up enough money for a down payment to purchase their first home. Renting makes it very challenging to build up net worth. The average net worth of a renter is only $6,300 compared to a homeowner which is over 40x that at $255,000.

Posted by Matt Curtis on


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