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IT’S NOT JUST HOUSING…
The short supply of housing that caused a boom in prices is spilling over into the rental market.
The short supply of housing that caused a boom in prices is spilling over into the rental market.
Renters are competing for fewer and fewer available properties. Demand is so strong that we’re seeing national vacancy rates down at 5.8%. While this isn’t a historical low, it’s the lowest we’ve seen since the mid 1980’s.
The most recent data indicates that rental rates in the 50 largest housing markets had risen 20% annually back in November.
WHAT’S CAUSED THIS?
In short: the pandemic. Yes, that ‘ol thing. And rather than just leave it at that, let us quickly cover the interesting factoids that made it so:
In short: the pandemic. Yes, that ‘ol thing. And rather than just leave it at that, let us quickly cover the interesting factoids that made it so:
- At the start of the pandemic, people who lost their jobs and or could work from home moved back in with their families. Now that the economy and job market as reopened, many are leaving the nest again, needing a place to live.
- The couples that split up during (and as a result) the pandemic now need two residences.
- Supply chain issues, government policy and labor shortages have crippled the construction of rental units
- The eviction moratorium kept the market tight due to eviction bans and low available inventory.
- Low housing supply keeps would-be homeowners as renters.
- Renting single-family is attractive for some since down-payments and closing costs can be out of reach.
HOUSING COMPETITION
Many would-be homeowners have been thwarted and outpaced by fast-rising prices spurred by the lack of homes for sale.
Many would-be homeowners have been thwarted and outpaced by fast-rising prices spurred by the lack of homes for sale.
In other parts of the country, this problem is exacerbated by large institutional investors (e.i. Blackrock) which have been buying up entire new subdivisions.
In fact, we continue to see more and more institutional businesses (hedge funds and pension plans) claim rental inventory away from the typical mom-and-pop investors and homeowners as they begin shifting from multifamily to single-family units. (75% of purchases were single family homes! – a two decade high).
Thankfully, we live on the West Coast where properties don’t cash flow like they do in the Midwest and Southwest. In our part of the country, we trade cash flow for appreciation. Good for the little guy and not so good for immediate cashflow-driven pro forma behemoth.
Thanks for reading!
