Over the past two years, the rental market has been unpredictable with rental prices reaching both historic lows and highs, as well as significant shifts in who is renting. While the new year is set to bring a mixed bag of profitability, challenges, and opportunities, here is an overview of expectations from real estate experts.
Rent Prices Set to Increase
While the start of the year saw declines and low rates in rental prices, markets bounced back nationwide as rental vacancy rates reached historic lows in 2021, fueling rapid growth in rental prices where they rose from minimal labels to a double-digit pace in growth. The Realtor.com Housing forecast predicts rental prices to advance beyond home price growth with a 7.1% increase in the next 12 months.
Demand for Rentals Will Increase
Due to the low rental vacancy rates in 2021, renters dealt with limited supply and excess demand in rentals. This trend of rental housing shortages, coupled with growing demand, is expected to continue in 2022 and to put pressure on rent growth. In addition, renters are expected to face a much more competitive landscape as increasing home and mortgage prices will push buyers out and into the race for rental units. Another factor is potential renters moving out of family homes and looking to rent.
Larger Spaces Will Become More Coveted
As work-from-home has become even more normalized, having a space that can function as a home as well as an office is a must. This demand for larger units is forecasted to continue even as workers return to the office.
Landlords May Raise Rent or Sell to Recoup Pandemic Losses
Lost rental income and supply chain delays will continue to affect property managers and owners alike, and many landlords are faced with limited options due to the pandemic and might be forced to sell or evict in order to recoup losses.
Real Estate Investors Will Continue to Benefit
While renters may see increasing rental prices as barriers, investors see the upward rise of prices as opportunities. Even as mortgage rates increase, the market will continue to see investors add to their portfolios and make purchases due to their promise of high yields and returns.
Rising Rents and Low Housing Supply May Hurt Renters Recovering from the Pandemic
Renters may also find themselves in difficult positions as rental rates increase and emergency rental assistance programs are not providing as much aid as necessary. For example, 47% of renters missed at least one rent payment since the start of the pandemic, according to Avail. If landlords have to evict tenants or decide to sell, renters may be pushed into an increasingly competitive market.
If you are a renter or a landlord, 2022 may be the perfect time to enter the rental housing market. Please contact us today to discuss your priorities.