| It is widely accepted that rent amounts are a | | | | these two years according to the market |
| fundamental factor in determining the value of | | | | tracking company MDA DataQuick. Responding on |
| housing. If housing prices rise too far out of line | | | | cue, the real estate research firm RealFacts Inc. |
| with rents, a combination of declines in home | | | | reported that rents increased by approximately |
| values and increases in rent amounts will ultimately | | | | 10% over the same period. |
| occur and enable these two averages to correct | | | | It may seem illogical that rents could actually |
| back toward each other. Although this relationship | | | | increase amidst falling home prices and the |
| between housing values and rents has endured | | | | economic downturn that usually accompanies a |
| the many peaks and valleys of past real estate | | | | poor housing market. Yet it is actually a poor |
| cycles, the events of the years from 1996 to | | | | economic environment that often acts to |
| 2006 strained this interconnection to | | | | stimulate the residential rental market. For |
| unprecedented extents. However, just as gravity | | | | example, the decline of economic conditions from |
| causes objects to eventually fall to the earth, | | | | 2007 through 2008 brought the construction of |
| subsequent years have shown that this | | | | new housing and apartments to a virtual halt, |
| correlation between housing prices and rent is | | | | thereby stunting the supply of available rental |
| destined to survive. | | | | property. Simultaneously, the demand for rentals |
| An examination of Freddie Mac’s conventional | | | | was enhanced by a dramatic increase in the size |
| mortgage house price index reveals that United | | | | of the available tenant base. Families displaced |
| States home prices doubled from 1996 to 2006. | | | | from foreclosed properties, growing populations, |
| Alternatively, the consumer price index shows | | | | potential buyers refraining from purchasing until |
| that rent amounts only increased half as much as | | | | home prices stabilize, difficulties in obtaining |
| sales prices over the same period of time. This | | | | financing, and widespread job losses all contributed |
| created an identifiable imbalance in this typically | | | | to make renting a very attractive option for large |
| synchronized relationship, which then served as a | | | | segments of the population. |
| reliable predictor of the paths that both home | | | | As evidenced above, housing prices and rents |
| values and rental amounts would follow in the | | | | remained interconnected despite the intense |
| years to come. | | | | pressures that pulled them apart. Although often |
| As if imitating a cinema production featuring two | | | | overlooked, this durable relationship should be |
| lovers involuntarily forced apart, the years of | | | | utilized to help predict housing market conditions |
| 2007 and 2008 set the scene for housing prices | | | | and prevent the occurrence of economic crises |
| and rents to once again be reunited. Nationwide | | | | well into the future. |
| housing values tumbled by approximately 35% in | | | | |
