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5 MAY

Renter higher costs and Happy Mom’s Day!

By Echo Fine Properties

Renter higher costs and Happy Mom’s Day!

 

First off, Happy Mother’s Day! Why not buy Mom a house 🥰?

 

The Rental Problem & Some Solutions. I was interviewed this week on WPTV and the rental crisis that is facing South Florida.  South Florida has had the fastest rise in rental rates in the United States. Lots of longtime residents are being forced to move away from their community as affordability is not realistic for them. There are a 4 main reasons for this and 3 possible solutions…..

Watch the rental interview with Jeff from WPTV

  1. Rentals are just following home price appreciation.  The home price rise has been steady month by month.  Rentals on the other hand were locked in for the contract period of time.  An example would be if someone signed a lease in January 2000 with a second year option at a 3% increase.  While the sale price might have gone up at the time, the landlord couldn’t make the change until January 2022, when the contract lease was up.
  2. Eviction Moratorium. It wasn’t until late last year that the moratorium on evictions was lifted. This gave the renter unusual power not to leave even if they didn’t pay or resign.
  3. Landlord Rising Costs.  Everyone likes to blame the evil landlord but that’s just not the case as there are 2 sides to the coin. Landlords have more carrying costs with higher mortgages or cash tied up, higher taxes…(remember a landlord can’t homestead a longtime rental property), much higher insurance (especially with all the roofing fraud), and general supply hyperinflation expense costs like air conditioning units or refrigerators.
  4.  Less Inventory. Between Airbnb’s (which didn’t even exist a decade ago) and longtime landlords who have sold off their homes to real users, the rental pool is far less. Furthermore, multifamily units just can’t keep up.

The prognosis to solve it really isn’t very good.  About a decade ago we did a week in Aspen over the summer. While going white water rafting, I asked our guide where all the workers lived?  She said about 10 years back, everyone lived in Aspen, but with all the rich folks coming from LA and NYC, it forced people to go south to Basalt or by the highway 45 minutes away. At the end of the day, the same thing is happening here. Rental prices are now following home values and aren’t going to go down.  Living up North or out West is really reality.

3 Solutions to the Rental Problem

  1. One solution is rent control. However, the appreciation has been done and rent control as happens in other cities will start out at today’s base price, not 2 years ago base price.  If the community feels it’s in the greater good than it’s a political discussion worth having.  However, it will flatten home prices.
  2. Advance notice.  If landlords were forced to give more lead time at say 90 or 180 days for price increases, it would give renters more time to prepare.
  3. Renters Aware. Renters need to plan 6 months out for price changes.  Making a plan, fixing credit problems and understanding their own finances will help in determining what is affordable. I know some who have moved to Martin County with newer construction and ended up loving it.

Whatever the case, it’s very difficult for people and families that have lived their entire life in an area to be evicted and some protection I do think needs to be discussed, especially for essential workers.

 

Jeff Lichtenstein is owner and broker of Echo Fine Properties, a luxury real estate brokerage selling real estate in Jupiter  and homes in Palm Beach Gardens, Florida. He has 20 years of real estate experience, has closed over a 1,000 transactions, and manages over 50 agents in a non-traditional model of real estate that mimics a traditional business model.  Some publications he has been quoted in.

Feel free to ask him a question directly at jeff@EchoFineProperties.com.

Posted in Open House Blog, Real Estate Tips on May 5, 2022 at 6:12 pm.

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