Declining federal interest rates might lead to a spike in both home-buying and rental investment–at least, that’s what an editorial in The Pittsburgh Tribune-Review posits.
According to the editorial, Pennsylvania is an exceptionally competitive market for renters, with low wait time on unoccupied units and a disproportionately low number of available rental properties in general contributing to an increase of at least 60 percent in rental prices over the course of the last 15 years.
However, an interest rate of 5.5 percent–nearly two percent lower than the average rate as of December 2023–may incentivize previously hesitant customers to move to more permanent housing. Tertiarily, the housing market may also benefit from increased interest in development, providing further options to prospective buyers.
In theory, the renewed interest in housing investment and development should free up some space for previously discouraged renters, though the market is unlikely to become markedly less competitive due to the aforementioned lack of rental availability.
It appears, therefore, that this confluence of lowering rates and increasing possibility for development makes the market perfect for investment in rental spaces. As the editorial points out, “there is still money to be made by steadily and fairly serving the rental market.”
On a national scale, this concept more than applies; rental prices have been skyrocketing for years, and with housing availability decreasing–and the subsequent spike in their prices as well–the cost of living has become untenable for single occupants and families alike. Lowering interest rates and increasing the number of units could help address this problem.
Of course, the number of people clearing out of rental units in favor of permanent housing is not likely to dramatically affect the market without being supplemented by some kind of development along the way, and the average price of a house–somewhere in the neighborhood of $200,000 in Pennsylvania–is still going to be outside of most buyers’ comfort zone, especially with the state average down payment of almost 14 percent.
If nothing else, Pennsylvania’s situation proves that the demand for rental spaces is still more than salient, while the housing market could also stand to benefit from an investment.
