Sunday, November 26, 2023

Houses Too Expensive to Buy Underpin Lofty Rents (or demand increases when the price of a substitute increases)

Renting a home is a substitute for owning one. House prices have been rising so that means that the demand for renting homes will increase. And when demand increases, ceteris paribus, price will increase. That is lesson I seen in this article:

Houses Too Expensive to Buy Underpin Lofty Rents: Single-family home rents are rising more than apartments this year by Will Parker of The WSJ. Excerpts:

"Big public companies that rent out single-family homes are beating the rest of the rental market this year, thanks to tenants who are paying large rent increases on the sorts of homes they increasingly can’t afford to buy.

LandlordsTricon Residentia, Invitation Homes and , which together own about 180,000 rental homes, each posted rent increases greater than 6% for the third quarter over the same period a year prior. 

That was about twice as much as the average increase for rental homes in September, compared with the same month last year, according to separate indexes from data firm CoreLogic and online-listing company Zillow.

Tricon Chief Executive Gary Berman attributed his firm’s gains in part to record-high home prices that are steering more would-be single-family home buyers toward rental houses. 

“In such a distorted environment for home buyers, the case for rental is more compelling than ever,” he told investors and analysts earlier this month."

"Apartment rents shot up about 15% in 2021 and continued rising at an above-typical pace in 2022. That growth has been moderating and has even turned negative compared with last year, according to some metrics, as record new apartment construction has helped slow apartment-rent advances in many parts of the country. 

, a publicly traded apartment landlord, reported a 2.2% decline in new-lease rents in the third quarter, compared with the same quarter a year ago. 

Rent growth for rental homes has also slowed since hitting a peak in 2022, but it is proving more resilient. Houses for rent are benefiting from the least-affordable home-sales market in many decades, a result of sale prices reaching new highs and mortgage rates hovering near a two-decade high."

"The average mortgage payment is now 52% higher than the average monthly rent check"

Related posts on supply and demand:

Orange Juice Prices Are at Record Highs—and Could Keep Climbing (article illustrates supply and demand principles) (2023)

Apartment Rents Fall as Crush of New Supply Hits Market (2023)

Egg Prices Surge to Records as Bird Flu Hits Poultry Flocks (2022)

How Supply And Demand Have Affected Beef Prices Recently (2017)

Cold Snap Sparks Record Rise in Natural Gas Prices in Asia (2021)

Supply Means Producing A Good And Customers Being Able To Purchase It (2018)

Are Expectations Helping To Raise The Price Of Lithium? (2021)

Is there a shortage of homes? (2020)

Farmers might be reducing supply of corn now in expectation of higher prices this fall (2019)

Used vehicle prices up as supply sinks, but relief is coming (2021)

What Chocolate Shortage? Cocoa Prices Steady as Record Output Projected (2019)

Supply & Demand And The Price Of Eggs (2017)

Another Journalist Misunderstands Supply And Demand (2009)

Fastest-Rising Food Prices in Decades Drive Consumers to Hunt for Value (2020)

Supply, Demand and the High Price of Vanilla (2019)


New Zealand sheep farmers turn to cattle as the world price of milk rises (2017)

Why has the price of eggs risen so much? (2023)

When demand for one good falls (gasoline and ethanol) leads to an increase in price for other goods (beer and soda) (2020)

Egg market seems to act just the way supply and demand predict (2019)

Chicken Shortage Sends Prices Soaring, and Restaurants Can’t Keep Up (2021)

India sets a price floor for sugar and gets a surplus (2018)

Drivers Throttle Back as Gasoline Prices Rise (2022)

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