Following a turbulent past year of lows, highs and pervasive affordability issues stemming from the COVID-19 pandemic, experts are predicting that 2022 will bring increased opportunities for profit and a unique set of challenging dynamics that those involved in the real estate industry must adapt to in order to stay competitive. Here are a few trends to help you keep tabs on where the rental market is heading in the coming months and how you can leverage this data to help grow your business.
Increasing Rent Prices & Competition
Rent prices initially saw a significant drop off in some geographic areas early on in the pandemic; however, rents have steadily risen to surpass pre-pandemic totals. Market data indicates that rents in the suburbs of leading tech-focused cities are rising the fastest with the advent of flexible remote working opportunities. A growing demand for rental properties on top of steadily declining rental vacancy rates on a national basis is expected to drive the rental market to a historically strong performance over the next 12 months. Current projections show that rent will grow 7.1% in 2022, making an already-competitive industry even more so.
Rentals in Demand
Comparable to rental increase predictions, economists are expecting that both home prices and mortgage rates to rise concurrently over the next year. As potential homebuyers increasingly have to compete amongst one another in a market that lacks the needed inventory to satisfy the existing demand, more and more individuals are finding themselves priced out of being homeowners. That means they will instead turn to renting, which will in turn fuel the already rising demand for rental units. Interestingly, studies have found that those individuals that were forced to move in with family over the course of the pandemic are now choosing to move out and start renting again, a trend that will only serve to add more demand for rentals.
Homebuying vs. Renting—Cost Efficient?
The current rent growth will likely outpace the rise in home sales price at some point this year, which means that in a number of areas renting may become the pricier option. In July of this year, studies indicated that first-time homebuyers actually saved money as opposed to if they had chosen to rent in over 50% of the U.S.’s major real estate markets. With rent prices steadily rising, we may see a similar situation in 2022. Regardless, some renters still will be unable to compete for a home given the scarcity of available properties and will be willing to pay premium prices for the right space.
Tenants Want More Space
The pandemic changed daily life in a number of significant ways—perhaps most notably in the way people work. As more and more companies offer remote working options, renters are looking for more usable square footage to function as both a living space and an office. Market data shows that 36% of developers have increased the size of the standard apartment they build. Although the demand for bigger rental units is partially attributable to at-home workers, there are some markets (such as college towns) where larger spaces are more ideal for roommates looking to save money on rent until the economy fully recovers from COVID-19.
Get Started Today
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