The New York Times had a rather provocative article about what happens When Rents Get too High. The premise being that people will buy real estate when the amount of rent they are paying begins to approach the cost a monthly mortgage payment.
I know that's when I decided to buy my first home. I had been living 4 houses from The Strand in Manhattan Beach. I had a one bedroom apartment that rented for $400 a month. The owner decided it was time to raise the rent and I decided I wouldn't pay any more then the current rent... so it was time to buy.
Now granted that was a long time ago but the premise remains the same. No matter what the Bubble Bloggers preach... paying a high rent when you can buy something for a similar monthly amount makes no economic sense. Actually these guys push renting so much that I have often wondered if many of them own income property and just want to keep their tenants.
In the last year rents increased all over the South Bay but especially in the Beach Cities. Interest rates started going down around the middle of October. Since that time we have seen an increase in sales activity in all the Beach Cities... but especially in Manhattan Beach and Redondo Beach... which represent the higher and lower end of the spectrum. So I'm wondering if the New York Times isn't right... when the rent gets too high people will start buying.
As a side note...The building where I rented recently sold and my little $400 apartment is now renting for $1700 which is well below comparable market rent( should be about $1950). I'm sure the new owner will raise the rents to cover his debt service. Hmmmm...I wonder if the tenant in my old place might be thinking of buying a new home....
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