As we already know, the real estate market is living through the shift caused by the post-pandemic world and conditions we live in today. The changes in demographics, preferences, and economic conditions make it challenging for property managers and real estate investors to continue thriving. Significantly, the single-family rental market is being reshaped by the factors of today’s conditions. To overcome all challenges and come on top, people must adapt to the new set of rules.
1. The New Normal for Single-Family Rentals
Owning a home is more than a mere aspiration as it was in the past. Today, renting, particularly in the single-family sector, offers the opportunity for anyone to enjoy the comfort of their own home. It is flexible, affordable, and does not need maintenance by the renters, which has drawn in the millennials, Gen Z’ers, and even Boomers. Ambre Goff says renting is now synonymous with relaxation and cost-effectiveness.
“There was a mindset my mom definitely fostered when I was growing up: You own your home. That’s your asset; that’s where the value is. And I don’t know if I believe that anymore…I love renting now. It’s just way more relaxing, way less expensive, and less mess, less fuss.” – Ambre Goff, Registered Clinical Mental Health Counselor, in Forbes.
2. Affordability and Rental Trends
Home prices continue to be far higher for many people, especially those of a single-family type, and the fact that they cannot afford to own a home at the moment deters them from the home-buying process while driving them towards the rental market. In 2024, we are witnessing the rental boom created as a result of the disparity between home buying and rental costs. There is no sign of slowing down of the rental demands, making the rental trends soar up. As Nicole Bachaud puts it, affordability favors renting over buying.
The cost of renting single-family homes is climbing more rapidly compared to rents for multifamily apartments, reflecting strong demand. A key factor is affordability, as many people are unable to buy homes and are still in search of their first property. – Nicole Bachaud, Senior Economist at Zillow, as mentioned in CNBC.
3. Inventory Shortages and Rental Market
The housing market is stuck in a cycle of needing more homes available for both buyers and renters. As a result, the competition is now fiercer, which makes it very tough for property managers to stay on top of changing rental trends. A ray of hope comes from this situation for intelligent investors ready to take advantage of the increasing demand for single-family rentals.
“Overall, experts agree there is still a shortage of homes when looking at both the buyers’ and renters’ markets…We have an oversupply of multifamily and a shortage of single-family.” – Erin Sykes, Chief Economist for Nest Seekers International, in NerdWallet.
4. Built-for-rent Properties Emerge
Built-for-rent (BFR) homes are a game changer in the rental market as they offer the best of both worlds: single-family living with the perks of rental convenience. These communities provide exquisite living conditions to renters who seek spacious and amenity-rich homes without the costs of owning them. In 2024, we are expecting to see continued growth in BFR developments, as stated by Ben Miller.
“BFR is the solution people want. They want homes with backyards and more space than you can rent.” – Ben Miller, Co-Founder and CEO of Fundrise, an online investment platform in Yahoo Finance.
5. Tenant Priorities Change
Everything in the rental market changes, and so do tenants’ priorities. Now pools and fitness centers considered luxuries once upon a time, are now must-haves for many renters. Also, pet-friendly policies are non-negotiable for a growing number of tenants as many people adopted a pet during the pandemic. Property managers now must adapt to these shifting preferences in order to attract and retain tenants effectively.
6. Geographic Impact on the Rental Costs
Location has always been a critical factor in rental costs. The desirable areas require higher rent prices, while suburbs have seen a search in demand as renters prefer space and community over urban living.
Nicole Bachaud, Senior Economist at Zillow, shared in an interview with CNBC that this trend suggests people are seeking to relocate closer to their workplaces or areas with more amenities. She anticipates that this pattern will spread across the country in the coming year.
7. Aging Renters Reshape the Market
Finally, a trend we should all talk about is how aging renters and their preferences are reshaping the market. It may surprise that older demographics choose to rent instead of own homes. Property managers must cater to their unique needs, including accessibility features and streamlined services. Their lifestyles are something property managers should pay attention to if they want to tap into that growing segment of the market.
Nicole Bachaud, Senior Economist at Zillow, mentioned in CNBC that the average age of a household head in a rental has risen to 41 years, up from 40 in 2019 and 37 in 2000. She noted that renters are aging, and as long as affordability remains a major issue, this trend is expected to continue.
Conclusion
To sum up, the single-family rental market in 2024 is rapidly changing. Many factors impact this change, from affordability to changing tenant preferences. To adapt to the market reality and prioritize the tendency of this faction, property managers must follow these trends and adjust accordingly, as the potential of single-family rentals is yet to be seen.