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Do rents go up or down with the real estate bubble?

Question:

Will rents go up or down with the real estate bubble?

Answer:

It depends.

The rents depend on the area. I have rentals in 3 areas and was looking into buying in Phoenix (but did not).

Take a look at the city of Maricopa, that's south of Phoenix, Arizona.
December 2006: Rent for a brand new 2200 sqft, 4 bedroom/3 bathroom house was $1200 according to realtors and $1100 according to Craig's List.

You know a lot of speculation happened in Maricopa.

July 2007: 8 months later.
Rent is $995 at best but be prepared for 4 months of vacancy. If you are asking $799 it will fill in 30 days. I got this information from a property management company who got it from the MLS.
I would sum it up as the rental market in suburbs of Phoenix has crashed.


Another market.

Capitola, California (my primary residence, and I also have a rental there). There's a university 5 miles away and a college 2 miles away. Not too many jobs in town.

2005: a 2-BR townhouse would rent for $1750

September 2007: I put my 2-BR townhouse for $2100 on Craig's List and I get 12 people who want to see it within 3 days. I had thought that I was asking too much, but apparently the market is tight. I signed a 1-year lease 5 days after posting my ad.

By the way, I see several ads on Craig's list asking up to $2400 for 2-BR cottages that are comparable to my place. Or $5600 for a 5-BR. I thought these posts were unrealistic. Now I think they are renting.
Summary: The rental market on Central Coast is strong. Up 20% in 2 years.


3rd market:

Las Vegas. Speculation, especially in the new developments in the outskirts. Renters like to live close to their jobs, shopping, facilities. Renters do not like to live in a quiet suburb that is 25 miles away. Homes in the outskirts suffer from higher vacancy rates than those closer to downtown. Luckily my Vegas properties were built 1990-1996 and in the more practical locations.
Summary: From my experience, rents have been pretty much flat in Las Vegas since 2004.


Anyways. I think you got my point. Look at your market and you will know where rents will go. It's all common sense.



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