Are Potential Buyers Less Inclined to Pursue Homeownership?
In the first half of 2017, rents went up faster in New Orleans than in any other city in the United States. The average monthly rent for a one-bedroom apartment in New Orleans was $1,553 in July, up 6.3 percent from January, according to the rent-analysis firm ABODO, which collected data on more than a million listings across the country.
The average rent in New Orleans was $381 more than the national average, according to ABODO. The average rent for a one-bedroom apartment in Louisiana was $834 a month.
Understanding New Orleans Rental Demand
Sam Radbil, the senior communications manager at ABODO, told Eric Craig of Curbed New Orleans that there are several reasons for the demand for rental properties:
Millennials are renting apartments for longer periods of time than the generations that came before them, housing inventory is tighter, (and) the housing crash has scared a lot of potential homeowners.
Baby Boomers are also adding to the demand for New Orleans apartments, Radbil said, as they downsize and look for a more convenient lifestyle in trendy areas of the city.
Across the country, young buyers are gravitating toward inner-city residences from which they can walk to restaurants and entertainment venues. In New Orleans, Kathy Finn of New Orleans Magazine reports, this trend has fueled the development of new apartments downtown and in the Warehouse District.
How the Rental Market Affects Home Sales
High demand for rental apartments may suggest that people are less inclined to pursue homeownership in New Orleans.
In USA Today, Elyssa Kirkham of Credit.com outlined reasons why people might choose to rent rather than buy:
- Financial priorities: For some people, it is more important to pay off student loans, save for retirement, or build an emergency fund than to take on a mortgage.
- Odds of relocation: The longer you live in a home the more likely the investment of homeownership will pay off. Buying may be more cost-effective for people who like their city, have a steady job, and are ready to live in the same space for a few years. This is a tough sell for millennials, who have been called the “job-hopping generation.”
- Credit problems: People with middling FICO scores may choose to delay homeownership until they can improve their credit scores, in order to qualify for better mortgage rates. It can take anywhere from six months to 10 years to improve your credit score, depending on your financial situation.
- Taxes, insurance and maintenance: Expensive home insurance premiums — flood insurance for Louisiana homeowners in particular — property taxes, and expensive home maintenance and repairs add to the cost of owning a home. People who expect or perceive a substantial hit from these costs may choose to avoid those expenses altogether by renting.
- Lifestyle choices: Homeownership has benefits for people who value freedom of choice, privacy, and control while renting has benefits for people who value convenience, flexibility, and short-term commitment.
The time when you are ready to sell your home may not coincide with the time when potential homebuyers are ready to select your home. If you expect to have trouble selling your New Orleans home through traditional means, Big Easy Buyers offers resources for homeowners who want to sell their houses fast and move on with their lives. Contact Big Easy Buyers at (504) 513-7878 or by filling out our quick contact form to set up an appointment at your property.