What's up? Graham It's guys here, so it's official. After more than a decade of Unstoppable growth, the rental market has begun to fall. A new report just found that rensive at a Breaking Point In a sudden reversal for landlords, they're set to decline even further in 2023 and were already off to a strong start with prices down 10 10. Yeah, prices are down ten dollars. well. I Guess this comes at the same time that one company's algorithm is secretly pushing prices back up. Congress is fighting back by restricting who could purchase a home and Millennials are moving back in with their parents. So given how many people this is about to affect, let's talk about exactly what's happening. The latest data that was just released, which locations are about to decline in price, and then finally, what you could do about this to make money on today's episode of mortgages are expensive because nobody is getting a mortgage although before we start to, as usual, if you appreciate videos like this that take me forever to research and compile, it would mean a lot to me if you hit the like button or subscribed if you haven't done that already I Know it sounds silly. it helps with the channel tremendously so. Thank you guys so much. And now with that said, let's begin all right. So first, before we go into the latest data along with a new proposal that would stop Rich landlords from buying homes, it's important to understand why and how much rents have gone up to begin with because the entire situation is turning out to be a mess that's just getting worse. That's because Number one, there are fewer affordable units on the market. Like between 2014 and 2018, the number of low-cost rentals dropped by half a million units per year for the simple reason being they were not profitable. Older buildings were frequently being torn down to build new ones, and with the rising cause to construction labor materials and land owners were forced to build luxury units to make any return on their investment. Number two is there's more demand for rentals. Since the 2008 mortgage crisis, demand has increased faster than in almost any other point in history, And during the pandemic, this was exacerbated. As home prices increased, people were unable to afford a home were forced to rent, driving up demand. Even further, many landlords also use this as a time to exit the rental business entirely during rent freezes and eviction moratoriums, leaving fewer units on the market for tenants to choose from. Number three, wealthier households were also choosing to rent. In fact, it was found that high income households have driven most of the growth in renters since 2010, and that means that his high income households choose to relocate, downsize, and save money. They're driving up the cost because they would be able to afford more Number Four. On top of that, landlord expenses are also increasing. Everything from property taxes Insurance labor, repairs, materials is costing more today than it did a few years ago. And if a landlord is barely breaking even, they'll have to raise the cost if they want to stay in business. And fifth, finally, home prices are also getting more expensive. Here's the thing: if you bought a four hundred thousand dollar home at three and a half percent interest, your all in payment is probably going to be about twenty three hundred dollars a month. Then you factor in the other expenses: repairs, property management, and vacancy. and most likely you'll have to get at least twenty eight hundred dollars a month to break. Even however, that same home today might cost you 550 000 with a five and a half percent interest rate. raising your minimum Break Even cost to thirty five hundred dollars. That means for everyone is buying a home today, you'll need a higher Break Even cost than someone else who bought a home 10 years ago. and that's being reflected in the price for rentals. So in terms of the latest data where prices are increasing and decreasing along with what you could do about it, here's what you need to know to start. in terms of why your rent could be going up. One company could be to blame, and that would be yield star. This is a surprising software for rentals and apartment buildings that takes a well, rather untraditional approach when it comes to maximizing profit instead of lowering the price. when you have a vacancy, their algorithms tell you whether or not you should hold firm until someone offers you a higher price. The business works by aggregating property information across tens of thousands of units, and the more pieces of data that flow into the service, the more accurate It's able to predict the maximum price from which they could charge, not to mention when one building rents for a certain amount others are able to charge are just similar amount as well, and that lifts up the baseline from which everyone else could charge alongside with them. Of course, they respond by saying that they're not responsible for the current state of the market and that the culprit is a lot of demand and not enough. Supply The software just helps managers react to Trends faster, which to a certain degree is mostly true, but others argue that this creates a pricing cartel which encourages landlords to keep prices higher, causing that to be self-fulfilling to keep prices high. Now, in terms of How High they reportedly claimed that their software could help outperform the market three to seven percent, and to some degree that would have an impact in the pricing throughout major cities. Although as far as what we're currently seeing and where we're headed throughout these next few months, here's what you need to consider. And when it comes to Rising rents, there are two ways to look at it. The first is year over year and the second is month over month. And this is very telling. In terms of which direction we're headed in the big picture, you'll see headlines like rent is up 8.8 percent year over year, rent costs are exploding and man arrested for allegedly throwing exit King is banned from having eggs. But but when you really get down to it, you'll begin to see that month over month prices have actually begun to fall. Data shows that in the third quarter of 2022 National asking rents declined by 0.4 percent in Rent.com reported that their data showed a month over month decline of 2.48 Meaning, for the first Q3 in 30 years, there are more available units on the market than there are tenants. Now this is especially good news for the Federal Reserve because Shelter accounts for more than a third of the overall inflation reading. So in a way the quicker rents go down, the lower inflation repairs, the fewer rate hikes we're likely to see. and then hopefully my YOLO stocks will finally go up in price. Of course, not everyone agrees with Moody's Analytics forecasting that rents will increase another five to seven percent throughout 2023, will the FED of Dallas believes that rents will increase another 8.4 percent, which objectively is already looking like it's not going to probably pan out, so take all of that with a grain of salt. The bad news for all of this, as far as inflation is concerned, is that CPI usually lags this data by four quarters, which suggests that shelter will continue to put upward pressure on the overall inflation through the first half of 2023.. after all, tenants usually sign a one-year lease and it takes those full 12 months for a new price to be reflected. Although in terms of who could charge rent, one proposal wants to fight back against the rich, greedy corporate landlords and something that would quite literally stop them in their tracks. And that's what brings us to the stop: Wall Street Landlords Act of 2022. This bill is based on the fact that a third of Americans are renting their home, while 25 percent of single-family residences were bought by a corporate entity, which by the way, individuals are able to purchase a property under an LLC for privacy or liability reasons. so I'm not sure if those people are included in that amount since differentiating between the two would be difficult. but I'll continue. This bill proposes several changes that would discourage specified large investors from purchasing a property. The first would disallow interest payments from being deducted as an expense, as well as eliminate any appreciation that would offset taxable income. On top of that, there would also be a sale or transfer tax equal to the amount of the purchased property. So if a home is selling for 350 000 and a Wall Street conglomerate wants to buy it, well, it's double and the other half goes to the IRS or the government. or Congress I don't know where the extra money goes It goes somewhere, someone else deals with it, not the homeowner. This bill also gives these investors a grace period of 18 months after the bill becomes law to sell properties and avoid the tax. Who would this bill be applied to? you might ask? Well, anyone who holds more than a hundred million dollars of assets during such taxable year. The only exception is that this would not apply to purpose-built single-family homes that were originally constructed for the rental market by the taxpayer, but that would also make them unsellable in bulk if the company ever wanted to get their money back out. Which in reality would just mean that less single-family homes are built. And the big picture. Something like this makes a lot of sense, and it's really about curtailing big hedge funds and corporations from buying up properties that would otherwise be available to owner users. But practically, it's probably not going to pass. especially not as is. Not to mention, purpose-built single-family rental communities should not be subject to a 100 tax, especially considering those properties wouldn't have existed in the first place if not for originally being a rental. Now realistically, I can could certainly see a Sur tax for certain Wall Street landlords that goes back into the city or the state from which they're buying within, but anything more than that is going to be difficult if not impossible. Not to mention it doesn't address the rude issue, which is simply that we need more homes being built. So in terms of what we could see throughout 2023, as well as the areas that are seeing the biggest price increases and decreases, here's the latest data Now, even though the data shows that rents are falling, not all locations are treated equally, especially if you're in Tampa because they're still paying 13 more. Thankfully for renters, though, areas like New York are already down 10 percent and several parts of the country are starting to post net declines from 12 months ago. On top of that, it was found to still be cheaper to rent than buy throughout most of the United States with 38 of the largest 50 metros being less expensive than owning. However, here's where we get to the really interesting part across the United States less than 50 percent of landlords raised rent by more than 3 percent, with the other half raising rents by less or even nothing. In fact, when you dive into the headline data, one analysis explains that most headline rent increases are reported from tenant turnover, not increases on existing tenants, and most of the rent increases that we do see are landlords that simply want to bring up the rent closer to market rate. Now, that doesn't mean you're not going to see any increase over the next year with 75 explaining that they intend to raise rates at least something. But they also point out that smaller landlords are less likely to raise rents during the renewal period since a vacancy would have a larger Financial impact to them than an institution where rent is spread throughout hundreds or thousands of units. So even though 2023 could be more expensive for you if you're paying under market value, the good news is that if you're looking for a new place to lease, most likely it's going to be cheaper in the future than it would be in the beginning of the year. Although in terms of my own thoughts, as someone has been a landlord now for over 10 years, here's what I think So overall, yes, prices will have to come back down. Frankly, I think they've risen too much too fast, and it's about time that we see some normalcy even as a lamb. Lord It just seemed like absurdly low inventory was driving prices higher than they should be, and it makes sense that things will begin to calm down. On top of that, you're also going to have quite a few homeowners who are unable to sell their home or get the price that they want, so they'll choose to rent until conditions improve. That should cause even more inventory to come on the market and depressed prices even further, don't expect rental prices to fall 20 to 50 percent next year, but anywhere between three and ten percent would be reasonable. and that is music to Jerome Powell's ears. So if you're a tenant right now, consider learning the market so you know how much a new comparable unit will cost. Don't be afraid to negotiate your lease by the time your renewal comes due, or potentially even sign a longer term lease in exchange for a lower price or no rent increase at the end of the day. Having knowledge like this is going to help save you so much money when it comes to negotiating with your landlord. So if this is something you found helpful, feel free to hit the like button and subscribe if you haven't done that already. So with that, City Guys thank you so much for watching! As always, feel free to add me on Instagram And don't forget that you can get a bonus from our sponsor Public.com by using the link Down Below in the description with the code Graham Enjoy! Thank you so much And until next time.