When Can We Expect Rent Prices to Decrease?

When Can We Expect Rent Prices to Decrease

Renters nationwide have felt the pain of increasing rent prices over the past several years. Rent increases certainly aren’t new; in fact, rent prices in America have consistently risen for decades.

But to many struggling financially, the repeated refrain that “rents always go up” is difficult to hear. Are there any situations where rent prices decrease? If so, what are they? And if not, what strategies can you implement to manage increasing rent prices?

The Push and Pull of Rent Prices

Rent prices are difficult to calculate, which is one reason many landlords hire property managers to assist with their rental property management strategies. The effective price for a given area depends on countless variables, including crime rates, school and transportation access, the local economy, local employers, aesthetic values, political values, and more.

Landlords and property owners are incentivized to increase prices as much as possible while still being able to attract tenants. Tenants are incentivized to find the lowest prices in a given area. This push-pull equilibrium settles on a price that both landlords and tenants mutually agree to.

Arguably, the biggest factors dictating rent prices are supply and demand. In line with the laws of economics, prices go up when supply decreases and/or when demand increases. The reverse is true wind supply increases and/or when demand decreases.

We also need to consider economic inflation. Over time, the dollar’s purchasing power decreases as the money supply increases. This leads to the price of everything increasing steadily – but it’s especially noticeable when inflation spikes.

Over the last several years, we’ve suffered from exceptionally high inflation rates, a limited housing supply and increasing rent demand. This combination has led to massive increases in the rental market.

Why Rent Prices Decrease

So why do rent prices decrease?

Hypothetically, rent prices decrease in any one of the following situations:

Reduced demand

If demand for housing in a given area drops, rental prices will naturally decrease. This is usually attributable to the loss of a major employer, spiking crime rates, or other bad neighborhood dynamics. Nationally, rent decreases could come into play if the population of our country begins to decrease significantly.

Increased inventory

Rent prices may also drop if there’s a sudden and significant increase in available supply. However, this is unlikely in most areas, as laws and regulations limit the potential for new housing construction.

Challenging economic circumstances

Rents may also fall if most people in a given area can no longer afford to pay them. This is usually attributable to challenging economic circumstances. However, in a prosperous economy, these situations are rare and temporary.

Deflation

Inflation gets all the attention from mainstream media sources, but economic deflation also exists – at least, in theory. In a deflationary environment, the dollar’s purchasing power increases, usually due to limitations in the money supply. This has drawbacks, but deflation is usually associated with a price drop generally. Given that the Federal Reserve is hard-committed to intentionally maintaining a relatively low inflation rate, deflation seems like an impossibility, at least shortly.

As you can see, while certain neighborhoods and cities may benefit from rent price decreases, general rent price decreases are extremely rare.

How to Deal With High Rents

So what can the average person do to deal with high rent?

Negotiate

Consider negotiating directly with your landlord if you cannot afford your rent. Most landlords want reliable, consistent tenants more than they want a few extra dollars each month, so if you’ve been a good tenant, you’ll probably have some wiggle room.

Consider moving

You can also consider moving to a cheaper area. Although rent prices are increasing almost everywhere, some neighborhoods still have exceptionally low prices compared to the national average.

Make cuts in other areas

Housing can be a crippling expense, but it is possible to make cuts in other areas to make up the difference. Making some sacrifices and living frugally might be enough to help you get by.

Generate new revenue

Alternatively, you can find ways to generate new revenue. Taking on a new side job or temporary gig can give you access to more cash, which you can then save up to buy a house.

Own

Renting and owning each have advantages and disadvantages and are both worth considering. However, if you’re sick of playing the rental game, buying a house for yourself might be a promising alternative. If you plan to go this route, check your credit score and consider increasing it; this, combined with a significant down payment, can greatly increase your chances of being approved for a mortgage.

Capitalize

Instead of suffering from high rent prices, you can take advantage of them by purchasing your own rental property. It can be a challenging and risky endeavor, but it could work in your favor – especially in the long term.

Given the nature of our economic system and current trends in this country, it’s unrealistic to hope that rent decreases shortly. However, there are many strategies you can employ to deal with high rent prices – or even use them in your favor.

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