Trends Point To Rents Edging Higher In The Future

You Can Count On Death, Taxes, And Higher Rents

Several trends point to the reality we should expect rents to edge higher in the future. While many economy watchers tout the line that any economic crisis will result in massive defaults and deflation, hidden forces may prove them very wrong. Over the last few decades, a great amount of wealth flowing into paper promises rather than tangible assets has masked true inflation, but it is everywhere. One place it is most obvious is in the replacement cost of buildings and infrastructure destroyed or damaged by nature's fury.

Local, state and national governments need revenue and this translates into higher taxes, plus a slew of new fees are about to be unleashed upon their citizens. These will take many forms but it is clear that we will see more taxes assessed upon wealth, income, and property as well as soaring utility cost often driven by government mandates. When push comes to shove, we can expect the government to suck wealth out of the private sector using the "greater good" as their justification.

Most people do not realize big government acts as a wall against deflation. Over the years as the government has grown it has created a wall of rising resistance to a pullback in prices. Today with more employees guaranteed their wages will not fall, and governments committed to buttressing their economies during "hard times," people have less to fear when it comes to seeing their incomes slashed. In this way, big government is more aligned to creating inflation or stagflation than adding to a self-feeding deflation loop. All these factors mean we should all begin to prepare for higher rents and expect the cost of a place to live and do business to edge ever higher with any reprieve due to high vacancy rates as only temporary.

It Comes Down To What You Can Afford

Rising property taxes and fees, utility bills, as well as increased maintenance cost, must be passed on or the supply of housing will substantially decrease. This translates into housing simply becoming unavailable which is what happens under price controls. Ever higher rents are already driving people away from expensive-coastal-cities expensive coastal areas such as New York City and San Francisco into Sun Belt cities where relatively cheap rents, nicer weather, and good job opportunities await.

A recent monthly report from RentCafe, a nationwide apartment search website that enables renters to easily find apartments and houses for rent throughout the United States, indicates this trend is already beginning to lift the cost of living in what were often considered inexpensive areas to live. While across the nation average rents climbed only just 3.3.% year over year according to Rent Cafe's Yardi Matrix, in January rents rose most rapidly in smaller cities such as the suburb of Henderson outside Las Vegas, Nevada. Of large metro areas, Las Vegas stood out as the city where rents saw the fastest growth (+8.3%)with rents in Phoenix, Arizona, also seeing a large (+7.6%) increase. Still, even larger increases occurred in smaller cities like Midland, Texas (17.7%), Odessa (14.2%) and Reno (10%).

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