For the first time, Brookline rental prices averaged more than $3 per square foot in Brookline, reflecting an 11% increase, year-to-date, per MLS-PIN data.
Amid interest rate increases and high purchase prices, more and more consumers are exiting the sales market and are looking to lease, however, it’s causing the rental prices to surge to new heights.
According to Freddie Mac, the 30-year fixed mortgage rate jumped to 5.78% this week, an increase from 4.98% in April. The average rate was 2.96% at the same time last year.
Many experts believe that this trend isn’t going anywhere as the Fed remains intent on continuing to raise rates to combat stubbornly high inflation. Here are the top 10 metro areas with the highest rising rents compared to a year ago, according to a Redfin survey:
- Austin, Texas: 48%
- Nashville, Tennessee: 32%
- Seattle, Washington: 32%
- Cincinnati, Ohio: 32%
- Miami, Florida: 29%
- Fort Lauderdale, Florida: 29%
- West Palm Beach, Florida: 29%
- New York, New York: 24%
- Nassau County, New York: 24%
- New Brunswick, New Jersey: 24%
Is this a one-year spike, or will we see this up-trend in the next few years as the economy stabilizes?
During the 2008 recession, Brookline saw a total of 23% jump in average rent prices from 2009 to 2013, an increase from $2,522 per month to $2,729 per month, or $2.09 per square foot to $2.57 per square foot. The average price-per-square-foot, year-to-date in Brookline, is $3.29 representing an average rental price of $3,525 per month.
In the 2008 recession, the inflation rate ranged from -0.36% to 3.16%, nowhere close to this year’s 8.6% inflation rate posted in May 2022.
During the pandemic, the cost of building materials and construction dramatically increased, and supply chain delays caused higher carrying costs; all contributing to a higher cost-to-build and higher costs to maintain rental properties, a cost that is being transferred to both buyers and tenants.
Potential buyers sitting on the fence, waiting for Brookline real estate prices to cool are facing a lose-lose scenario: not only are rent prices soaring, but the potential monthly payment for a mortgage also has increased for 6 months in a row, with mortgage rates rising from 3.07% in November 2021 to 5.78% in June 2022, with no reversal in sight. (According to Freddie MAC)
We are also seeing the pandemic trend of Boston apartment dwellers looking for larger spaces in the surrounding suburbs continue as remote and hybrid work has become more permanent.
Without an influx in new apartment buildings or new landlords in Brookline, and with an expected continued jump in interest rates, we will continue to see an increase in rents. It is important that Brookline encourage a thoughtful increase in the supply of new apartment offerings through advanced town planning.