The real estate world over the last two years has changed dramatically. Mortgage rates went from record lows in 2020 to skyrocketing back up two years later. Homes on the buy/sell market flew off the listings faster than buyers could compete with; now homeowners look for alternatives for the home they can’t sell. Rental legislation changes, eviction moratoriums, and now upcoming rental property licenses in Denver; the shift in the real estate world is undeniable. And while change isn’t necessarily a bad thing, it’s something that should be watched carefully. So as we move toward 2023, here are a few rental trends to keep an eye on.
Rental Trends to Watch
The Days of Accidental Landlords Are Behind Us.
After the crash in 2008, many homeowners found themselves stuck in the category of accidental landlords. Having inherited or owned a home they couldn’t sell, they chose to rent it out instead. But according to data from Buildium, the number of those who consider themselves accidental or unintentional investors is shrinking. In their 2023 Property Management Industry Report, the company found that only a quarter of those surveyed considered themselves accidental landlords. Over half of those surveyed considered themselves intentional investors. The shift towards a more intentional mindset means that many real estate investors are looking for someone to partner with when it comes to managing their portfolios instead of simply taking a burden off of their shoulders.
Mortgage Rates Will Most Likely Continue to Rise
As of November, interest rates rose to just over 7% and are predicted to increase as high as 9% in the coming year. This dramatic increase has priced many would-be buyers out of an already high-priced market, forcing them to turn to renting instead. This affects sellers as well, with many homeowners shifting plans to sell. The number of homeowners looking to rent out their homes that aren’t selling has increased exponentially, leading into our next rental trend.
Single-Family Home Rentals Are In Demand
If the last two years of Covid and quarantines have proven anything, it’s that the need for more space has become a major priority for many of us. Thus the rise in demand for single-family home rentals. Over the last few years, the number of renters moving to the suburbs has steadily increased, with 68% of tenants surveyed listed as renting outside of the heavily crowded urban and downtown areas. Renters with growing families, pets, or additional space needs frequently turn to single-family home rentals to meet their needs. And with many developers building entire single-family home rental communities, it’s safe to say this trend isn’t going away any time soon.
Inflation Will Most Likely Continue.
Many of us are feeling the effects of inflation, from the heightened costs of groceries to gas to home heating fuel. Things are more expensive, and the costs of living are expected to continue to increase as we move into 2023. Inflation affects real estate and the rental market in many ways, including how easily tenants can cover the costs to meet their basic needs. According to the 2023 Property Management Industry Report, only 26% of renters said they paid their bills in full and on time. Eleven percent stated they struggled to pay their bills. So as we move into the coming year, landlords and property managers will need to watch how high costs rise and how that affects their tenants’ ability to pay.
As with the years before, 2023 will pose its challenges and opportunities. We will be watching carefully how these, and other, trends play out in the rental market.