The Rise and Fall of the Current Rental Home Market
Over the past decade or so, the rental home market has seen quite a whirlwind of change. Whereas several years ago, there was no shortage of rental homes available, there are very few rental home options in most areas today. By having a better understanding of how the rental home market has fluctuated in recent years, landlords and property owners can make the most of the current market and prepare for future changes.
The 2008 Recession and Its Impact on the Rental Market
When the recession happened in 2008, there was a flood of available rental homes. This was due to the fact that so many people weren’t able to get out of their recently purchased homes but still couldn’t afford their monthly mortgage payments. To avoid losing their homes, many people had no choice but to rent them out. These are what we at Bancroft & Associates call “reluctant landlords.”
During this time, there were plenty of affordable rental housing options for young people and families. This was because it was difficult (and impractical) to sell a home during the recession, when homes were commonly worth less than what was owed in loans.
The Current Rental Home Market
Things have changed in the past couple of years, however. The market has gradually improved, people have paid down their mortgages, and home values have increased! This is great for the housing market and the economy as a whole — but it has left a gap in the rental home market.
Simply put, there are fewer rental homes available because home values have risen. As a result, people are either choosing to stay put in their homes, or they’re selling to take advantage of the increase in property values. In turn, the few rental homes that are available are also leasing for a higher rental rate.
The Numbers and Data for Rental Homes
To put things into perspective, our team here at Bancroft & Associates alone has seen a decrease of about 75 percent in the number of available rental properties—yet the number of potential tenants has remained more-or-less stable. Where there used to be 4 rental homes available with certain characteristics, now there might only be one! And for the same number of applicants, which means that many people are applying but being turned down due to the number of applicants for one property.
Metro areas have a particularly high demand for rental homes—but many prospective tenants are frustrated by the higher rent that accompanies these limitations and demand when it comes to available rental properties.
What This Means for Property Owners
For property owners, of course, this is mostly good news. With higher demand for rental homes, landlords can enjoy larger profit margins. This also means they can be a bit “pickier” about choosing their next tenants and take the time to find quality and reliable renters. This is especially true when you consider the fact that rental prices are finally beginning to “catch up” with the market (increasing by 15‒20 percent in most areas) after about a decade of remaining relatively stagnant.
Whether you currently own a rental home or are thinking about purchasing a single-family rental as an investment property, having the right property management company on your side can make all the difference. Maximize your profits in this favorable market by working with Bancroft & Associates! With more than 44 years of experience, we specialize in helping Tucson-area landlords profit from their real estate investments while providing tenants with a great rental experience.