The economy isn’t always going to soar. At some point, something goes wrong and prices fall. But how will this impact your rental property? Does rent go down during recessions?
When these types of economic events happen, it’s important to be prepared as a rental property owner. You need to know what to expect and plan accordingly so that you don’t get wiped out as a landlord.
With that being said, let’s take a look at historic data from the 2008 recession. We will examine what impact a recession had on rent prices.
Using this information our goal is to answer the simple question: How much does rent go down during recessions?
Did 2008 Impact Rent Prices?
The 2008 financial recession was brutal. It was the single largest disruption to the U.S. housing market our country has seen since the Great Depression.
Banks collapsed. Mass layoffs began. And people lost their homes at such a fast pace under foreclosures and bankruptcies that the number of homeowners essentially collapsed.
But despite all this carnage, there was one economic side effect that you might not expect: rental property owners saw a boost.
People Started Renting More
Contrary to popular belief, the 2008 crash actually benefited the owners of rental properties.
Estimates show that a whopping 5% of the U.S. population switched from being homeowners to being renters during this time. The number of renters in the country increased 43.3% from 38.5%, according to Business Insider.
The end result? Rents stayed mostly steady during this time.
Rent Prices Went Up
Although it may come as a shock, landlords actually saw rent prices surge during the recession.
Estimates from Trulia show that Americans saw their renting costs go up during this time. Americans saw a little under a 1% rent increase from 2008 to 2009 alone.
This can be explained by the law of supply and demand. Since more people were demanding rent, the price of rent went up.
Rental Properties Are Great For Recessions
If you’re looking for a stable financial vehicle to weather the storm of a recession, then a rental property may in fact be your best bet.
The benefits for rental property owners were so great during past recessions that Forbes has even declared rental properties as being “your one steady oasis in a recession.”
Of course, it’s not perfect. No investment is. You still might lose money. But that’s true of most investments!
Something To Take Away With You
We’ve given you a lot of numbers to look at and analyze. So experiment with it!
Check the numbers yourself to see if you will be financially sound when bad times hit.
In fact, we even designed a tool that you can use to plan for recessions accordingly. It’s a simple Rental Property Calculator.
Simply visit it and enter your data for a rental property you own or intend to own. Once you see the numbers, you’ll have enough data to create an action plan for your rental property.