Seattle may be the rainy city, but the future is bright when it comes to Seattle rentals. In the last few years, “more and more people are coming here as Seattle’s job base expands, and newbies are likely to rent,” according to the Seattle Times. With few homes to buy and a lot of interest in the homes that are available, Seattle’s rental market has been fierce, and rental prices have risen quickly. This has placed landlords in an excellent position. With predicted interest rate hikes, how will Seattle’s rental market adjust?
What’s Happening to Consumers’ Finances?
The rental market is connected to many other financial and lifestyle elements in consumers’ lives. For instance, those who are new in town or there for a potentially short-term job may not want to purchase a home. If it seems like it’s more financially savvy to rent instead of saving up for a down payment and buying a home, consumers will do that. Home buyers’ financial decisions are also connected to the broader market. When interest rates change, then home buyers’ decisions about renting and buying change as well.
Right now, mortgage rates are increasing. This occurred after the presidential election and the federal interest rate change in December. How will this impact renters’ and buyers’ decisions?
Interest Rate Hikes Change Renters’ Minds
The World Property Journal states that “the majority (53 percent) of current U.S. home shoppers consider rising interest rates to be among the top factors impacting their ability to purchase a home.” The reasoning is simple. With higher interest rates, a mortgage that pushes a home buyer’s ability to pay is no longer affordable. A lower interest rate means that buyers might be able to make those mortgage payments, as there is less interest added to the mortgage total.
A higher interest rate not only makes mortgage payments less affordable, changing mortgage rates also make consumers nervous. They’re less prone to jump into longer-term financial deals, since they are not sure what their financial future will hold. If rates change yet again, this could mean that they are stuck with a mortgage that they can’t afford.
What Will Renters Do?
When times are uncertain and potential home buyers aren’t sure what the mortgage rates will do, many of them will likely decide to simply stay put. Although the goal may be to eventually buy a home, many will continue to rent and to gradually save a down payment.
Those who move into the Seattle market will take a look at the tight real estate market and the prices of new homes and decide that the best decision for now is to rent. Fears about rising interest rates and difficulties in finding suitable homes on the Seattle market will keep them in Seattle rentals for a while longer.
This is good news for those who rent out their homes. As an owner of Seattle rentals, as home prices increase, mortgage rates rise, and home inventory remains low, it may be more expensive for you to purchase new Seattle rentals, but the ones you have will have a dedicated pool of tenants to choose from.
At Lori Gill and Associates, we’re dedicated to helping you build your business in Seattle rentals. Whether you own one property or many, we can help you market and manage your properties. We know the Seattle market, and we’re here to help you build your capacity to manage your rentals. Connect with us today.