2022 Rental Market Analysis & Prediction
The rental market over the past two years has been unpredictable, to say the least. Unprecedented eviction moratoriums and shifting work cultures have changed who is renting, who is buying and where they want to live. 2022 is on the horizon and ready to pose a different sort of rental outlook yet again. Here are some trends we predict in our rental market analysis will matter over the next year.
Remote work will continue to drive home choice
The pandemic taught us that many of our jobs can be performed remotely, and that proximity to an office is no longer a requirement. At least, proximity to a corporate office. The ability to have a home office as a requirement for ownership has significantly increased in 2021 and is expected to continue.
While the ability to have a home office is potentially a stronger driver for purchasing a home than renting, expect high demand to continue for homes with an extra bedroom or workspace and a decline for smaller studios.
Welcome to suburban living
Ris Media reads the trends as continuing this shift away from the office and into the suburbs. Whether renting or buying, home seekers are looking for space and proximity to nature or parks instead of crowds. In the CBS News ranking of best places to live in 2021, you'll notice that the top areas included are suburb after suburb.
As a balance between accessing large-city amenities yet still optimizing space and that small-town feeling, expect suburbs to continue to grow.
Multi-family apartments to multiply
The multi-family apartment rental market is predicted to continue to rise in price and lower in vacancy according to the National Association of Realtors blogger Scholastica (Gay) Cororaton. The multi-family vacancy rate has fallen from 6.6% to 4.6% over the past two quarters in part due to the above changing demographics of the working population. Multi-family rental prices have also increased, up 11.4% year-over-year, and this trend is expected to continue as construction and sales fail to keep pace with homebuyer demand.
Home purchases are postponed
Home purchases driving the rental market and changes in real estate buying may swing potential purchases back into the already saturated rental market. Potential buyers who wished to purchase in 2021 were faced with a median sales price increase of 13.2% nationwide per Redfin, while the number of available homes for sale fell by 24.8% at this same time.
This seller's market may be enough to deter many new homeowners from purchasing at this time, and if not able to purchase these, often millennial buyers will continue to look to rentals for their home needs.
Single-family rentals will become scarce
Eviction moratoriums may have been an aid in helping prevent pandemic-related homelessness to tenants, but to owners, the experience was entirely different. Those hardest hit by these moratoriums were individual-owned single-family landlords. The National Rental Home Council reports that 60% of single-family rental homeowners say missing rent from the pandemic has negatively impacted their ability to pay ongoing property and maintenance bills.
Many have found the idea of owning an individual rental to no longer be a safe investment or meet their financial needs. When selling, 79% of property owners who have sold at least one single-family have not sold this to another rental agent but a primary residence.
For those single-family owners who are sticking around, expect tighter and more stringent rental criteria. In addition, 2/3 of those who have ceased to rent had rates under $1250, so expect higher rates to prevail in these same types of homes.
Inflation isn't over
As prices go up nationwide, expect the rental market to follow — and as rental prices go up, expect market inflation to follow. As explained by the New York Times, the inflation cycle between rental cost and other consumer prices is somewhat cyclical with the cost of some sectors driving up prices in other areas.
The coronavirus pandemic created a "perfect storm" as demands changed, supply chains stalled, labor shortages loomed and housing demand increased. An indicator that this issue will continue on into 2022 is the Consumer Price Index which the Times reports that the "measure of rent up 0.5 percent just between August and September" and that this price is the fastest-paced increase in 20 years.
As the rental market and other consumer spending are linked, expect increases to continue throughout 2022.