No one saw 2020 coming, or could have predicted that it would drastically alter almost every aspect of our lives. The rental market was not spared, and faced many hurdles as vast numbers of people decided to move. A large percentage bought their first homes, while others hunkered down with friends or family members to cut costs.
Because so many people switched to remote work and decided to flee the big cities, rental prices actually dropped in major cosmopolitan areas, including New York and San Francisco. Moving to tech hubs such as Austin, Raleigh and San Francisco was largely put on hold as employers encouraged workers to do their professional duties remotely through at least part of 2021.
ApartmentGuide.com has come up with a number of well-researched rental market trends for 2020 that theyexpect will become the “new normal” for renters and property managers.
5 Top Renter Trends for 2020
1. Rental prices will remain flat in the first half of 2021
Rental prices for apartments will likely remain stable during the first half of 2021, which can help consumers who have lost jobs temporarily or had their hours slashed because of government-mandated shutdowns, said Brad Dillman, chief economist at Cortland, an Atlanta-based multifamily investment and management firm.
“As a result of resiliency, we expect rent pressures to rebound in the second half of next year. This rebound appears sustainable given the relative strength of the employment recovery, even as it is likely to slow,” says Dillman.
Rents are a mixed bag with dense urban areas seeing weaker rental prices and drops in average rents, while some suburban sunbelt areas project small increases in rents, according to John Loper, an associate real estate professor at the University of Southern California.
“There has been a shift of tenants out of urban areas with high rents due to employers having employees work from home and employees relocating to less expensive and less dense areas,” he said. “The big question is how many of them will stay in the less expensive areas they have relocated to and how many will return to urban areas.”
2. More renters will continue to become homeowners
Consumers will continue to buy homes as interest rates remain low. The National Association of Realtors reported that existing home sales rose for the fifth consecutive month in October. In 2021, home sales are predicted to rise to 5.5 million, the highest annual mark since 2006 with the median home selling for a record high of $293,000, the NAR said.
Lawrence Yun, NAR chief economist and senior vice president of research, says, “One astonishing development has been the hot housing market as consumers eyed record-low mortgage rates and reconsidered what a home should be in a new economy with flexible work-from-home schedules.”
The top 10 markets that performed well during the pandemic will likely continue this trend:
- Atlanta-Sandy Springs-Alpharetta, GA
- Boise City, ID
- Charleston-North Charleston, SC
- Dallas-Fort Worth-Arlington, TX
- Des Moines-West Des Moines, IA
- Indianapolis-Carmel-Anderson, IN
- Madison, WI
- Phoenix-Mesa-Chandler, AZ
- Provo-Orem, UT
- Spokane-Spokane Valley, WA
3. Location will be less important to job seekers
The rental market trend of job seekers moving across the country for a new job could be impacted as remote work is now becoming a common option. Increased workplace flexibility will remain intact for the foreseeable future, since many companies transitioned their workforce to remote work in 2020.
“We don’t anticipate job seekers placing as much emphasis on location as it relates to their commute as in years past,” Dillman said. “The strength of these trends, according to RealPage, is reflected in the fact that apartment occupancy rates are now lower in San Francisco than they are in Houston, a market known to be easy to build in,” he said. “Such a dynamic is mind-boggling when we recall that people were renting tents in backyards in the Bay Area just a few years ago.”
4. Demand for affordable housing will continue to rise
Evictions will be a significant issue in the first and second quarter of 2021 as the eviction moratoriums are lifted, according to Loper. The second wave of COVID-19 and the corresponding shutdowns of many sectors means there is increased pressure on many renters who are losing hours or losing their jobs.
“The good news is that we have been running around 90 percent of rents being collected so we are only dealing with 10 percent of the rental stock with eviction potential,” he said.
Demand for affordable housing is high now and will only get worse for people looking for one-bedroom apartments in suburban areas, said Freddie Zamani, CEO of EcoSmart Builders, a Calabasas, CA-based construction company. “You can’t find any affordable single units around Los Angeles without paying a premium.”
5. New construction could face delays
The costs of construction materials started to increase in summer 2020 due to the unprecedented demand, impacting companies like Weyerhaeuser Co., the largest North American wood producer. The lumber supply chain was impacted by the pandemic and because some homeowners conducted much-needed renovations. The higher costs of lumber also pushed home prices higher — NAR said the average new single-family home sold for an additional $16,148 in August compared to the middle of April.
“We expect builders will feel this pinch over the quarters ahead, possibly causing a slowdown with new construction,” Dillman said.
The pandemic is also going to bring the development of new apartments to a screeching halt, said Dave Marcinkowski, managing partner with Quext, a Lubbock, TX-based apartment technology company and Madera Residential, a property management company.
“In time, demand will return and prices will go right back up,” he said. “The key today is being able to weather this storm, which we believe will have a negative impact for up to two years.”
Record numbers of people are relocating these days, and it’s affecting the rental market big time. Experts predict these 5 top renter trends for 2020 will prevail.