It is a landlord’s market. That is the indisputable takeaway from2015 Rental Market Report. As the trend continues towards more rentals, the construction may not be able to keep up with demand. Just as the apartment to condo transitions in the late 90s and early 00s forced an alteration of the real estate landscape, the general market crash of 2008 has forced this alteration. More and more people are moving toward the rental market as a hedge against perceived instability in the markets, and continuing concerns over a repeat of 2008.
The report hits several main points:
Inventory Near 20 Year Low
Continuing a trend seen since 2009, vacancies dropped to a mere 6.8% nationwide.
Fewer Vacancies Leave No Room for Negotiation
Sellers market. So the renter’s ability to haggle for a lower price has left the building. That also lowers conversion times, with a third of units renting faster than last year. Increasingly, the only negotiation is in how much over asking is getting paid.
Money Talks, Loyalty Walks
This is not how I work, but more than half of the property managers out there would not renew a lease if a prospective new tenant offered more. This lack of vacancies also means that getting into a unit is harder, with owners looking for higher credit scores, higher income-to-rent ratio and excellent rental histories.
Rates Expected to Rise in 2016
88% of the managers surveyed expressed an intent to raise rates an average of 8% in 2016. This is another trend that shows no sign of stopping, and the rate of increase is itself increasing.
Renters are Struggling to Make it on Their Own
As a result of increases to rental rates discussed above, 43% of surveyed property managers reported seeing an increase in the number of applicants who do not meet the income requirements on their own and require a guarantor or cosigner. Or roommate. There is also a 45% increase in rentals to Millennials as that generational cohort defers home ownership. This ties to the income requirements – this demographic is faced limited job availability, lower incomes and high student loan debts.
Homeowners are Trading in Mortgages for Leases
In a reversal of the usual housing flow, more than half of the surveyed managers saw an increase in homeowners moving from houses to apartments. Which just adds to the crowded rental space.
Existing Renters Not Giving Up Their Leases
Would you? As the market continues to be tight for renters, more and more of them are not looking to move, but renew. This is despite the increases in rents that hit annually. Considering the lack of available units, it is really no shock.
What does this mean in the final analysis? The importance of keeping on top of your rental payments has never been greater. With the market looking more and more like a landlord’s paradise, missing rent payments by even a day is leading to notices, and (depending on the laws governing your area) eviction processes being initiated. In Chicago, that means 5 day notices are on the rise.
Gold Coast Property Management will work with you to get the best tenants available, and keep everyone happy. We look forward to working with you on getting your vacancies, if any, filled quickly and with solid, quality, tenants.