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As home purchases are slowing down another real estate sector is heating up.
Background:
The monthly principal and interest portion of a house payment for a $300,000 home late in 2021 assuming a 3% interest rate and 5% down-payment would have been around $1,200/month. Today at a roughly 5% interest rate, that amount has gone up to roughly $1,530/month. This increased cost has caused a slowdown in the amount sales happening.
What does it mean?
This slowdown does not indicate that there isn’t still a huge demand for housing. Many that have decided to not purchase a home now are looking for rental options instead. This increase in demand for rentals has caused rent prices to soar. Along with the increased demand, rising property taxes, insurance, and maintenance costs are also bringing up rental prices.
From my own experience working with investment property owners, many are seeing numerous applicants for any available units. In Minnesota, rents are up roughly 11% while nationwide that number is closer to 25%.
The demand for housing remains strong. We can likely expect this demand to remain for several years to come.
