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Declining rents in the United States’ oil producing regions could be a key factor in bringing down national averages 10 years after the housing bubble burst.
The housing bust that accompanied the recession led to a push to encourage Americans to rent homes, instead of owning them. This is why the cost of rental housing has outpaced annual inflation by almost one percent for 34 months straight, according to new data from the Labor Department on Friday.
Rents were 3.9 percent higher than one year ago for the third month in a row in March, the department said. The estimate is amongst the highest since the Great Recession began a decade ago.
Some experts believe that rental prices may soon come down as new properties start to satiate demand.
“We think the recent slowdown is more than just noise,” Goldman Sachs economists wrote earlier this week. “We believe the lagged impact of elevated multifamily construction activity in the last two years is exerting upward pressures on vacancy rates and downward pressure on prices.”
Oil-rich areas in Texas, Wyoming, and Montana have seen rents drop from between $85 to $295 between February 2016 and February 2017. The largest declines occurred in Midland, Texas, where average rental costs dropped 25 percent to $900. The drops are likely due to 2.5 years of bearish oil markets, which have led to mass firings that have pushed former workers away from small towns to large cities in search of new work opportunities.
Depending on the state, owning a home is between 33-93 percent more expensive on a monthly basis than renting one, according to analysis by NerdWallet. The former option still offers more financial security, tax deductions and value over the long-term, however.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…