Your 2022 Projected Rental Market Analysis

September 16th, 2021
Your 2022 Projected Rental Market Analysis

The COVID-19 pandemic has changed the world in many different ways. Much has been made of the “New Normal” that will result in permanent changes to health, lifestyles, and the economy. As markets and personal preferences change, the housing market inevitably changes along with them. Thus, understanding both the short-term and long-term effects of COVID is essential for developing a 2022 projected rental market analysis.

Effects of the COVID-19 pandemic on the housing market at large

While the COVID-19 pandemic has had outsized effects on almost every area of daily life, it has been the housing market that has experienced perhaps the most unexpected effects. Early word in the press was that COVID-19 shutdowns would spell doom for the US housing market -- a market that serves as the biggest driver of the economy during both good and bad economic times.

Instead, government intervention through lower interest rates, paycheck protection, and other measures helped drive an unprecedented boom in real estate activity and home prices, pushing many renters toward homeownership. At the same time that demand was rising, inventory was trending lower due to the reluctance of homeowners to open their homes to buyers and their fear of moving during the pandemic.

At the same time, many companies that had implemented work-from-home (WFH) policies during the early days of the pandemic began to announce that they would make remote work available permanently or adopt a hybrid model with one or two days in the office and the rest at home. This opened up a world of new housing opportunities for families that had settled in-town or within convenient commuting distance of major metropolitan centers. It also meant growing demand in outer-suburban and rural markets that are normally left out of big jumps in home prices.

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Effects of the COVID-19 pandemic on the rental market in particular

All of this movement in the housing market has produced a sort of trickle-down effect in the rental market analysis. As hopeful homebuyers were priced out of their chosen markets, demand grew for larger rental properties, including single-family homes with large outdoor spaces that could accommodate multiple home offices and homeschool spaces. Indeed, large institutional investors have begun aggressively investing in residential real estate, predicting top-tier returns in the months and years ahead.

In order to maintain some stability during the pandemic, local and state governments instituted a variety of eviction and rent increase moratoriums to protect renters from rising demand and the effects of restricted rental inventory. While widely praised by affordable housing advocates, these measures were derided by small-scale rental property owners who found themselves spending months without rental payments. As the pandemic wore on -- and restrictions were extended -- the economic effects on both landlords and renters have been exacerbated.

Now, with moratoriums ending, experts are warning of a looming eviction crisis and subsequent housing insecurity. These upcoming evictions are expected to hit particularly hard in communities that serve primarily minority and economically disadvantaged renters and workforce housing. That means that the very frontline, retail, and food service workers who have been most at risk during the pandemic may be the first to lose their rental homes as it ends.

Rental market saturation as a predictor of rent prices

Rental market saturation has been a major part of the changing story of US rental market analysis. At the beginning of the pandemic, there was a flight of young professionals from major cities to the relative safety of family homes back in the suburbs or in rural areas. This led to greater availability and falling rental rates in major urban areas.

As home price appreciation slows, rental costs would still grow in 2022, eventually outpacing home price growth. For sure, landlords wish to recoup the gains lost as a result of the eviction moratorium that was extended during the pandemic.

According to Business Insider, “shelter inflation, which tracks costs – is forecast to boom even as price growth elsewhere cools.” Currently, year-over-year rental costs have grown at a relatively lower rate compared to home price appreciation, leading specialists to conclude that rental continues to be a lot more profitable than buying.

If home value appreciation slows in 2022, rental costs might still grow. The national Apartment List Rent Report for June 2021 suggests that rents are still on the increase across the country. Year-over-year rent growth currently stands at 5.4% across the nation. As home costs reach record highs, mortgages rise and affordability becomes a problem for prospective homebuyers, the appetite for rentals might increase as prospective consumers favor renting.

Now, as the FDA has provided full approval of the first of the COVID vaccines, cities are refilling, leading to more saturated rental markets and rental rate increases. At the same time, secondary rental markets have seen increased rental market saturation from WFH employees seeking greater affordability outside of the city.

Positioning your rental properties for 2022

Comparing the properties in the portfolio that you own or manage to available properties in your market helps you to determine both current and future demand. In addition, it is important to keep an eye on economic and demographic trends to gauge the potential for rent increases, decreases, or rental rate stability.

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There are a variety of ways to use the information gathered during the pandemic to plan your acquisition, management, and disposition of rental properties in the months and years ahead. Here are some factors to consider:

  • Break down your rental properties by size and amenities to determine where there are shortages in your current market that you can fill.
  • Analyze your current rental rates to determine whether they are still in line with your market. In many cases, you may find that rental rates in your area have seen significant increases in the past few months.
  • Focus on improvements that speak to current renter demands and market your properties with these in mind. Bonus spaces and enclosed terraces offer a great option for home offices. Outdoor spaces are especially in demand for socially distant activities and entertainment.
  • Evaluate your local market for recent changes that may be long-term and adjust your strategy as needed.
  • Explore infrastructure and COVID-related government programs that may provide funding for increasing the availability of affordable housing or the creation of Section 8 housing.
  • Work with your attorney to ensure that you are on the right side of changing policies and processes for eviction, rent increases, and other matters.

As you crunch the numbers and make the important decisions that are the result of your rental market analysis, it is vital for you to have a clear understanding based on reliable information. That’s where RentSpree’s rent estimate comes in. Price your property with confidence based on relevant comparables and reports on vacancies and trends in your area.