Dive Brief:
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When rents spike, the demand for remodeling services drops, at least in high-rent San Francisco, a study by BuildZoom revealed.
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The reason: Spiraling rent prices indicate heavy demand for apartments and rental homes. When would-be tenants are lining up at the door, landlords tend to skip the between-renter renovations so they can fill their vacancies quicker.
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On the other hand, when home values increase, so does the demand for remodeling. According to BuildZoom Chief Economist Issi Romen, a 10% increase in home prices translates into a 4.3% boost in remodeling jobs.
Dive Insight:
San Francisco is, by many measures, the country’s least-affordable city, where the median income will qualify a mortgage applicant for only 14% of houses for sale. The resulting large number of renters, noted Trulia’s Chief Economist Jed Kolko, has created “two distinct classes: homeowners and renters.” The BuildZoom analysis shows that rising rents not only pose a financial challenge for tenants, but they leave them with homes that are not upgraded or maintained as well as they would be were market conditions different.