Why have rent and mortgage prices doubled(or more) in the past 2 years?
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Everyone has to live somewhere. Shelter is one of the most basic human needs. You really can’t opt out of it and have any kind of reasonable quality of life. So demand is always high.
Supply, however, is constricted. Many towns and cities will have strict regulations on where and how new housing can be built, and people in general tend to vote against expanding this, especially when it comes to cheaper housing, out of the perception that it will overtax their town’s resources or encourage “undesireables” to move in, as well as the reality that as long as supply remains low, the value of property they own goes up, which benefits existing homeowners. Exacerbating this is a recent increase in property investors, who profit off of owning homes they rent out, list on AirBnB (or similar), or “flip” (buy a rundown house, do cheap renovations and then resell at a profit). These all take homes off the market or increase the price of homes on the market, raising new mortgages. Also, interest rates have gone up significantly in the past year in an attempt to curb inflation, which increases the cost of new mortgages.
Rent is exacerbated by some of these same issues as well as others. Taking rental properties off the market for AirBnB decreases supply. New rental construction tends to be “luxury” apartments that rent for more, because the cost of building them over budget/low-income apartments isn’t significantly higher but the end profit is. And there has been a rise in shifting rental costing decisions to software algorithms, which has resulted in higher prices as removing the human element removes compassion and there’s a polyopoly – when everyone is using the same algorithms to set prices (and those algorithms can frequently share data), prices can go up across the board with little recourse for renters.
It basically comes down to the old adage: buy land, they aren’t making any more of it. Supply is limited and often dwindling, and demand is steadily high and increasing in popular areas.
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