Rental trends: What landlords and tenants need to know
Understanding the current trends in the rental industry will help both landlords and tenants navigate this changing landscape.
As many leases near their expiration, landlords will seek to find qualified tenants to move into their properties, while tenants will embark on a search to find a new rental place to rent that best suits their priorities. Understanding the current trends in the rental industry will help both landlords and tenants navigate this changing landscape.
Millennial home ownership
Buying a home was once seen as the pinnacle of the American dream. The influx of millennials into the rental market has proven that this is no longer the case.
Almost two-thirds of millennials have a desire to own a home, but the current increase in home prices have been a deterrent. According to Investopedia, when the housing market started to rise, the amount needed for the 20% down payment made obtaining a home that much harder. Other millennials remained as renters because they are still single, have student debt to pay off, or want the ability to move to a larger metropolitan area easier.
Of course, there are many factors that an individual must weigh when determining whether or not it makes sense to buy a home. For some it may be the right decision, but the average age of the first time homebuyer is between 22 to 30. Some other contributing factors include rising mortgage rates and the amount of student debt that many millennials carry.
According to Forbes, there is a record-setting pace of home sales driven by a number of factors, the first being a shortage of supplies and an increase in demand.
What does this mean for landlords?
As homeownership has more financial barriers and can be a less appealing lifestyle choice for individuals who may not be ready to put down roots in one place, this means there are more renters in the market. With more people looking to rent, there will be less vacancies and a bigger selection of prospective tenants, increasing the likelihood of finding a more qualified candidate.
What does this mean for tenants?
More competition. To help separate yourself from the rest, make sure your credit is in good shape, as a low credit score or payment history can be an immediate disqualifier for many landlords.
Renting is affordable
Though renting is increasing a bit overall, it is still cheaper than home affordability in most places. According to Newsweek, recent data indicates that housing affordability has hit a 15-year low and mortgage payments are now higher than rent in 45 of the 50 largest metropolitan regions in the United States.
The number of people who live in your county may play a role in how affordable renting is. Renting is generally more affordable in areas with more people, while less-populated counties tend to favor buying.
Last year, there were very low vacancies for landlords and apartment owners. According to the National Apartment Association, as of August 2021 the occupancy rate was 96.9%, and was higher than the previous high set about 20 years ago. This might mean that owners will not have to offer big incentives that were common when occupancy rates were lower and can also charge slightly higher rent prices. Developers are also responding to these trends by building more apartments to meet the demand.
What about rent prices in my city?
While national trends certainly are important to observe, there are many different local factors that influence rent prices in the locations where you own properties or are looking to rent. Monthly rent prices have risen 15% in 2022 to an average of $2000, and popular cities like Austin are up 50%.
Technology and real estate
Since the pandemic, both landlords and tenants are moving toward online options when it comes to managing their properties, finding places to rent and paying rent. There are many aspects of successfully managing a rental property and more and more landlords are turning to online solutions when it comes to things like collecting payments, creating leases and finding qualified candidates.
Landlords who use online solutions for things like rental applications, electronic signatures of leases and online rent payments are able to provide a better experience for their tenants. Do not underestimate the positive impact that these solutions can make on attracting tenants and retaining good tenants when you are able to provide them a pleasant experience. Most tenants do not expect to have to fill out paper forms, write checks or send things by mail. Landlords typically find that using online payments increases the rate of payment.
In addition, it's easier than ever for tenants to find their next rental because of all the online resources available. While pictures are still the primary means of attracting tenants to your property, one emerging trend is virtual showings. Virtual reality technology and 360 video give tenants anywhere in the world the ability to see into the property as if they were actually standing inside.
When landlords understand the minds of tenants and are aware of emerging trends, they'll be more successful in operating their businesses and have a leg up on their competition.