Sunbelt states have been seeing many people coming to their major cities, and both rental and selling prices have skyrocketed in the last two years. Cities like Tampa, Houston, and Austin saw rent prices climb over 25%. Many real estate experts think that the increase will continue in the future, but one mogul thinks otherwise.
Marvy Finger is the founder of The Finger Companies, an apartment developing company that has residential buildings throughout the Sunbelt. He decided to sell half of his properties for $2 billion to real estate company Greystar because he thinks that there soon will be a decline in numbers on the market.
He stated that as supply rises, the rent prices will have to fall, and he anticipates it happening soon. Right now Texas city residents are paying an average of 1000-1400 dollars a month for a one-bedroom apartment.
Mr. Finger has been doing what he does since the 1950s and he calculated that selling half of his portfolio would grant him 33 times more money than if he rented all those units throughout 2022. This developer says that there have been record-high numbers of new rental properties and that the influx of supply will slow down, if not stop, the rent levels.
However, other developers and real estate companies are certain that the numbers will continue to rise, mostly because the vacancy levels have been historically low, down at 5.2%. And now that mortgage rates have begun rising above expectations, home shoppers are going to have to opt for renting. Greystar experts doubt that the market will see the end of price increases, as younger millennials and older GenZs leave their roommates and parents, and start building families.
The housing market is in a state of economic shock right now, because people are standing in line to take advantage of the rising rates. Homebuyers are aware that their monthly mortgage payment may not be bearable if they wait it out. Not only are the houses overpriced, but the mortgage rate got to 4.5% - a number no housing expert expected just three months ago.
This economic shock will be short-termed. People will steer away from house-buying as the rates rise, but the demand for housing will not get to a point of balance with the current supply. Another important fact is that people are no longer migrating from big coastal cities to the Sunbelt as much as they used to at the start of the pandemic.
As a matter of fact, some of them are going to come back to New York, Los Angeles, and San Francisco, as pandemic-driven restrictions and telecommuting cool off. But some Texas cities, such as Austin and Houston have become centers of the tech industry, over the past few years, so they might not feel the end of the pandemic-driven migration.
So, is Marvy Finger’s act a sign that the market may be cooling down, or is it a ‘’quit while you’re ahead’’ business tactic? He thinks that developers are overbuilding, trying to catch up with the demand, but that ‘’what’s happening now can’t last’’ and that ‘’the glut is definitely coming’’.
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