Friday, July 22, 2016

Rental Rates Reach the Sky in New Haven

A recent article announced that the penthouse apartment in the old Union Trust building has just rented for $6200 per month, a new record as far as we know.  There have also been very high reported numbers for smaller apartments in other buildings.  New Haven is becoming full of luxury apartments, and the parade doesn't look as though it's ending any time soon.  Several more projects have just come on the market, or are on the drawing board.

Despite the increase in supply, New Haven shows up on lists of places where buying is cheaper than renting, because rental rates have gone up at least 50% over the past ten years, while house purchase prices have declined over the same period.  If you include the effect of the current low interest rates, it's really a bargain to buy here.  We are at the top of rental market boom towns, and at the bottom of recent home price appreciation areas.

Of course, buying makes more sense if housing prices stop declining, and there are signs that that is happening.  The signs that Realtors see include lower listing inventories and multiple offers on newly-listed properties.  Over time, we are also beginnnig to see year over year appreciation in certain towns and categories, and problems with purchases "appraising out".  This is an industry term that means that accepted offers are coming in higher than appraisers think fair market value is (always an indicator that prices are rising, since appraisals, which compare recent sales to pending contracts, obviously lag the market when it is rising--if prices were declining, recent sales would be higher, and everything would appraise for more than the contracted price).

If you take these two factors together--rising rents and an improving market for sales--and you throw in mortgage rates as they are today, it seems that any rational person would choose to buy right now, unless they were only going to be here for a short time, unless they didn't have a down payment or a good credit score.  But the bargains will only last for so long, so act quickly!