This has been a question that comes into my mind. If you think about it, the last housing boom was fueled by the laws of supply and demand. There are more buyers than homes for sale thus prices were inflated because buyers where outbidding each other.

Now that we are in a housing slump, not only that there are more inventories in the market but also there are more homes that are going on foreclosures. Because of these, previous homeowners are now entering or re-entering the rental market. According to Nicolas P. Retsinas, director of the Joint Center for Housing Studies at Harvard University and editor of the forthcoming book ”Revisiting Rental Housing: Policies, Programs, and Priorities,”

“All those owners are now becoming renters, and Economics 101 goes into effect. If you have high demand and a restrained supply the only result is higher prices. In the near term, you will also see rents go up. People, who in the past could qualify for homeownership, will no longer have access to those sub-prime mortgage products and now will become renters.”

Here in Southern California, this theory could be a reality. The average rent for a two bedroom apartment in Los Angeles County is already at $1,500. Because high median home prices command high monthly payments, most families won’t be able to afford a home if sub-prime mortgages are no longer available.  With a growing population and unaffordable housing prices, more people would be relying on renting a home.

Again, not all parts of Southern California face high rents. Just look at the situation in the Inland Empire. Although a lot of apartments have been converted into a condominium, there are more apartment complexes that were built the past couple of years, thus, maintaining a stable monthly rent.

How about your area? Are the rents affected by the current housing slump and foreclosures? Share us your thoughts!