As another holiday season is disappearing in the rear-view mirror, we are seeing an uptick in inquiries, showings & applications which is the norm for the 2
week in January. This is great news for anyone with a turn-over during the November – February time frame. However, the slow down started earlier and so far, is also rebounding slower than years past. That comes on the heels of a slightly slower than normal leasing season during the Summer months of 2019.
We certainly have been spoiled with the “Hot” leasing of the last several years, so many clients & customers have forgotten what a “Cold” leasing season is like. Does this mean that the rental market is going cold? Certainly NOT, however we are seeing much more affluent and selective prospective applicants with higher expectations and demands. After the last market correction, the need for rental property was rampant and anything with an address could be leased at almost any reasonable price, within a matter of days, if you were willing to overlook a few blemishes. As the rental market conditions have continued, prices continue to increase and the selection process for prospective applicants has become much more stringent, so too have the demands of the prospects to have updated properties with higher end finish out. The days of mid-grade carpet throughout, laminate counter tops and brass & glass fixtures being enough to attract a well-qualified tenant are diminishing. Now tenants expect wood floors, granite counter tops and modern lighting packages with matching door hardware across all price ranges. For the higher end properties in the $2,500 to $4,000 price range we are seeing expectations of integrated smart devices, green features and additional perks that in the leasing world was never a consideration previously. In the past, a normal turnover consisted of spot painting walls, cleaning the carpet and plugging in an air freshener and the property could be rented at current fair market value within a matter of a few weeks. With properties turning over within the last year, if a home has not been updated, we are seeing no real activity, or the feedback has generally centered around the outdated conditions. This is certainly a concern since many of our properties were either last updated or built around the 2002 to 2006 time frame so the idea of them now being considered outdated is surprising.
Are you worried??? Don’t be!
There is good news, too… The Gen X and certainly the Baby Boomers were taught that home ownership is what you should strive for and many of them do not plan to rent unless that is the only option. Those generations are also the ones who hold the majority of the rental properties. However, that is not the case for the Millennials & Gen Z, where their expectation for their living situation does not include ownership at all. Many of them purposely plan to be renters for many years to come, if not forever. The perception of being a “Renter” has many more benefits than being a “Homeowner” for these generations, so the renter pool will continue to increase, rental rates will continue to rise and the demand for rental properties is expected to exceed supply for many years to come. Recent studies have shown that a large number of the next generations entering the work force are afraid or at the very least reluctant to be homeowners and see ownership as a burden or a liability that can be easily avoided by just continuing to rent. That is great news for the buy and hold investors and even good news for flippers and builders, but they will likely need to curtail their finished product to cater to the investor buyers instead of the owner-occupied buyers like the previous years.
What does that mean for the rental market??? In anticipation of Millennials & Gen X entering the rental market in droves we have begun to rehab and update many of our properties which is having a significant increase on the rental rates and a shortened time on the market compared to similar homes that have not been updated. It would be wise to talk with your property manager as they are real estate professional, who understand the expectations of the upcoming renters and discuss plans to make sure your property stays relevant and high in regard to its desirability.