Published: April 12, 2023 | By: WRE News
The pandemic, while now in the rearview mirror, left a significant impact on the rental market that is just now beginning to surface, according to Elliot Adler Real Estate Development. It’s creating both challenges and opportunities for renters and property managers alike. Before the pandemic, the rental market was characterized by rising rent prices, low vacancy rates, and high demand for urban living. However, the pandemic has upended these trends, leading to changes in rent prices, tenant behavior, and property management practices.
With the largest supply of new rental units in four decades coming on the market, rising interest rates, and slowing home purchases, the rental market is anything but settled. According to Apartment List’s March 2023 Rental Report, the rental vacancy index now stands at 6.4 percent, which is its highest reading in two years. That fact alone is cause for concern. When coupled with impending high inventory, pricing pressure will likely be a significant issue in some markets through 2023.
Even after an unprecedented 3.4% decline in median rents since last summer, rents in many major cities remain 20% to 30% higher than they were when the pandemic began. Renters are forced to pay high rents or move to more urban areas where rent prices and demand are lower.
Unfortunately, higher interest rates are likely to continue because of inflationary pressures. The good news is that February marks the first month we will have seen average rents grow since mid-2022. The trend matches pre-pandemic growth patterns for an average historically typical February rent increase. While many are not ready to make the jump from renting to home ownership due to high interest rates, they may find some relief in lower rent and lease fees, depending on where they live.
The pandemic, economic uncertainty, and geopolitical turmoil have prompted adaptation and innovation in the rental market. Creative solutions, remote working, and smaller markets have provided a temporary oasis for those who are not geographically constrained by work or family to a particular location. Real estate market trends and human behavior will continue to create many challenges and opportunities for real estate developers. Real estate developers must identify and create opportunities where they can in this tough real estate market.
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