Forbes said last week, “Looking to buy a house, but think house prices are going crazy? You’re not wrong. Housing prices are rocketing upwards across the country, showing their biggest annual gain since 2005. As a result, existing homeowners add to their housing wealth, while younger, less affluent, and nonwhite buyers face little supply and rising costs.”
“Housing price pressures are found across the country. According to the Case-Shiller index, single-family home prices rose nationally by 13.2% in the year ending March 2021. That’s for the entire country.”
Housing Prices Are Rocketing Upwards
The rise in home prices nationally has led to some pretty hefty property tax increases, and many are seeing double-digit increases, and one was up 23% from last year. The increases are due to the rise in sale prices. Unfortunately, some recent sales are not in the database yet. That means we will see a continuation of higher assessed valuation next year.
The Rise in Prices and Taxes Has Lead to Rent Increases
According to a national study from a real estate company, “after a year of stagnant growth, rent nationally is rising sharply now that the vaccine is allowing cities to reopen. Median one-bedroom rents rose 4.9 percent year-over-year, while two-bedrooms rose 6.5 percent.
According to the U.S. Bureau of Labor Statistics, prices for rent of primary residence were 1,548.28% higher in 2021 versus 1913 (a $15,482.80 difference in value). Between 1913 and 2021: Rent experienced an average inflation rate of 2.63% per year. This rate of change indicates significant inflation. In other words, rent costing $1,000 in the year 1913 would cost $16,482.80 in 2021 for an equivalent purchase.
“With all the changes in the last couple of years, I’ve had to increase my rent. I just can’t cover the expense if I don’t,” says Rick McDonald, an Omaha landlord and vice president of the Metro Property Owners Association.
McDonald says most of his tenants stay on his properties for 7 to 17 years, and part of the reason they stay is that rent is low. So now he is raising rents.
He says there are a lot of reasons for that. “The cost of the house is going up. Property taxes have gone up an awful lot in the last couple of years, and insurance has gone up—even building materials. You can’t buy a faucet; you can’t get lumber and stuff. The price is really high. Not to mention the contractors we hire are upping their prices too,” says McDonald.
For some landlords, there is another problem. There has been a moratorium on evictions. Unfortunately, the end keeps getting extended. President Joe Biden announced Thursday the eviction moratorium would be extended through the end of July, causing fear in landlords. California has extended the deadline to September 30, 2021.
Jeff Schaben, the Red Key Real Estate and Property Management owner, said, “while some landlords can manage without collecting rent temporarily, others simply can’t.
“You have some landlords; this is their second source of income, and they can kind of weather the storm, but you have other people who are a little scared,” Schaben said. “I have one woman who relies on her rental income. Unfortunately, her husband has passed, and this is her only source of income. So she’s pretty scared.”
What’s next for California? Does the state prohibit evictions forever? And what about the owners facing mortgage and property taxes without rental income? Is the state looking at nationalizing real estate?
Paige Panzarello, the “Cashflow Chick,” Founder of The Tryllion Group, Investor/Entrepreneur having done $150 Million+ in real estate transactions; Specializing in Non-Performing Notes. She has been a regularly featured guest on “The Cashflow Guys” podcast, and you can also find her on many other Real Estate and Entrepreneurial podcasts and in the Wall Street Journal as well. She also speaks at various Real Estate Investing clubs and conferences across the country. Paige teaches the “Building Wealth with Notes” Workshop that drills down into the details of how to successfully buy Non-Performing Notes, create passive income, and mitigate risk. www.CashflowChick.com/training
Surviving the crash of 2007, Paige knows how “life happens” every day. Her passion is to help people build wealth, secure their financial future, enjoy life, and be ready-not broken! Whether it is improving communities one house at a time, assisting borrowers in staying in their homes, or working with other investors to learn a new way to earn higher investment dollars for their retirement years potentially, Paige dedicates herself and her business to helping people improve their lives in every way. For more information got to www.CashflowChick.com