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That is not how rent prices work. It is pretty much supply and demand. No one cares how much your financing costs. If people start losing their jobs because the

That is not how rent prices work. It is pretty much supply and demand. No one cares how much your financing costs. If people start losing their jobs because the FED induces a recession, that means less money for rent. Younger folks move back in with their parents. People take on an extra roommate or two. Demand for rental units goes down. Prices go down. If a significant fraction of landlords have financing costs that greatly exceed rental income, that is their problem. They can't just pass that cost on to renters because they feel like it.

w14 4y ago
> If a significant fraction of landlords have financing costs that greatly exceed rental income, that is their problem. They can't just pass that cost on to renters because they feel like it. Purely anecdotally, a large proportion of the housing available for sale in Plymouth (UK) seems to be rental property. Tenants are being thrown out while landlords sell up. I have been wondering if the drive to cash out at a time when holding cash isn't necessarily such a great idea is exactly what you suggest - that those with buy-to-let mortgages are looking at the potential of interest rates rising faster than rents.
topkai22 4y ago
The supply of housing for purchase directly competes with the supply of housing for rent. If you can get a 2 bed home for $1800/month as a renter or $1700/month to own, most people will choose to purchase, forcing landlords to lower prices. Similarly, if you can get $2500/month in rent for a property that costs $2100 a month to own and operate as an investment people and institutions will purchase or convert units to rental properties. Yes, they aren't 100% interchangeable (down payment requirements and transaction costs can change the equation renting all things being equal ) and some markets (the bay area in particular) seem to have a bizarre separation in the cost of renting versus buying, but in general this holds true.

w14 4y ago

> If a significant fraction of landlords have financing costs that greatly exceed rental income, that is their problem. They can't just pass that cost on to renters because they feel like it. Purely anecdotally, a large proportion of the housing available for sale in Plymouth (UK) seems to be rental property. Tenants are being thrown out while landlords sell up. I have been wondering if the drive to cash out at a time when holding cash isn't necessarily such a great idea is exactly what you suggest - that those with buy-to-let mortgages are looking at the potential of interest rates rising faster than rents.

topkai22 4y ago

The supply of housing for purchase directly competes with the supply of housing for rent. If you can get a 2 bed home for $1800/month as a renter or $1700/month to own, most people will choose to purchase, forcing landlords to lower prices. Similarly, if you can get $2500/month in rent for a property that costs $2100 a month to own and operate as an investment people and institutions will purchase or convert units to rental properties. Yes, they aren't 100% interchangeable (down payment requirements and transaction costs can change the equation renting all things being equal ) and some markets (the bay area in particular) seem to have a bizarre separation in the cost of renting versus buying, but in general this holds true.