It has been extremely difficult to predict market trends for rental properties during the past two years. Because of this, many property managers’ strategic planning was reactive, keeping them afloat despite lockdowns, high inflation, alarmed tenants, and a general lack of supplies. We are anticipating 2023 and watching to see if market dynamics will lead to further increases in interest rates to control inflation. This makes predicting the rental market challenging, although some obvious tendencies are emerging.
In this article, we will analyze some of the most significant rental market trends in the U.S. in 2023
- More homeowners in the U.S. rental real estate market are considering investments
Based on the 2023 U.S. market research, only 24% of rental owners’ respondents regard themselves as unplanned landlords. These landlords possess or acquire real estate they could not sell and are forced to lease out—or incidental investors—who have become landlords by accident but now recognize themselves as real estate investors. Instead, 52% of rental owners polled deem themselves purposeful investors. That indicates a significant rise in the proportion of investors among property managers’ clients over the previous five years. Property managers have had to change their services because their clientele now includes more owners interested in investing. More investors desire a collaborator in their investment plan rather than just an expert to manage upkeep, rent collecting, and tenant movement.
Today, many property managers advise their clients on home improvements and solutions to boost value and diversify their portfolios. Some investors focus on their property management company to locate properties to invest in since they are professionals in their marketplace.
- The countryside and single family real estate remain popular in the U.S.
The U.S. market industry reports highlight the appeal of single-family rentals. The percentage of respondents who resided in rural or suburban regions, which has consistently risen over the last five years, was 68%, based on market research. They are seeking:
-An area that is family-friendly, peaceful, and safe
-The room, both inside and outside that, enables people to expand their households. These spaces entail being able to bring in kids, dogs, or other family and friends.
-a family-friendly residence with air conditioning, a washer, a dishwasher, and a dryer
By offering these facilities, management companies with single-family homes in their inventories can entice tenants.
However, property managers need to be aware of the extent of debt and insufficient funds that single-family renters frequently possess. Market studies discovered that single-family tenants had bigger households to support, fewer savings, and higher debt. As 2023 approaches, homeowners need to form strong communication with people who may be impacted by the present economic crisis and to be in continual connection with locals as the market continues to deteriorate.
- Return of Mixed-use real estate
While mixed-use real estate—those that combine housing, commercial, and business centers- lost some traction during the epidemic, the pattern reappears as the construction process progresses. Furthermore, about 500 of the 1,400 malls in the United States, according to research by specialists for U.S. Real Estate 2023, are being renovated into mixed-use areas. Residents can easily access restaurants, retail establishments, entertainment venues, and other necessities, including supermarkets and medical facilities, thanks to the buildings’ many appealing amenities.
For property management companies interested in making investments, specifically those with the resources and personnel to add retail buildings to their portfolios, mixed-use buildings may be worth considering. Even if mixed-use buildings are not on your clientele’s priority list, it is still important to understand how those assets can affect your overall portfolio. For instance, properties close to a mixed-use facility will profit from the comfort of being so close to numerous stores, eateries, and other services.
- Interest rates on mortgages could increase more
For the fourth year in 2022, interest rates were increased to just over 7% close to the end of this year. Market analysts forecast that they might grow to 9% in 2023. Americans hoping to buy homes have been compelled to reconsider and keep renting due to the enormous increase.
To maintain occupancy rates to a minimum, management companies should monitor the Fed to determine how mortgage rates balance out in the upcoming months and modify their sales and tenant recruitment plans.
- Historic inflation will persist in 2023
Everything has become more expensive today, including food, petrol, and home products. Market and economics experts claim that inflation is at a 40-year high right now. As we head into 2023, living prices are still increasing amidst the passage of the Inflation Reduction Act. The 2023 U.S. real estate studies show that 26% of tenant participants settled most payments on schedule and in full, while 11% said they had trouble keeping up with their living costs.
Property managers discovered that keeping lines of contact open with their tenants throughout the worst global epidemic helped reduce the stress of late monthly payments. Those sentences will still be essential to a property management plan. For instance, management companies might keep assisting tenants in locating government aid programs.
Rising costs will also impact the ability of property management companies to maintain their firms’ profitability. To see where they may restructure agreements or seek more cost-effective solutions, they must look at vendor fees and overhead, for instance.
- Tenants want variety in their space
Tenants’ preferences for different rooms will continue to be affected by the trend toward working at home and the rise in the number of families renting apartments. Market experts predict that more locals desire:
- Properties with an additional room or flexible area: Homeowners are converting larger open rooms into smaller private spaces or putting a workplace into an empty corridor space.
- Houses with a yard: A huge yard is only sometimes a guarantee. A short deck or a tiny garden are examples of outside areas.
- A residence might have a bigger kitchen, family room, and ancillary areas for food preparation or reading corners.
The speculation about rental market forecasts grows louder as 2023 approaches, and possibilities for owners and managers to improve and add to their properties also become more obvious.
- Tenants now represent a variety of age brackets
A sizable share of Americans who rent currently is Baby Boomers who do not desire the effort of maintaining a home. The greatest majority in the U.S., the Millennials, also join the property market simultaneously, typically as renters primarily.
This trend will require changing the housing options, and amenities management companies offer their tenants. For instance, older persons who want to age in place will seek convenience and accessibility. Rental homes look for features like lifts, ramps, safety railings in the restrooms, and other Americans with Disabilities Act-compliant systems. Also, there will be changes in facilities, advertising, and marketing. Even Baby Boomers will ask for different solutions that accommodate different ages within a family, more electronic choices for communication, and increased flexibility for inhabitants.
You can sense the worry in the atmosphere about the economy as the year concludes. According to the consensus of most economists, 2023 will, at the very least, see a minor downturn.
However, there are some positive aspects. According to data, the vacation rental business has more reason to be upbeat than depressed because travel growth prospects can still overcome economic challenges. Short-term rentals will keep attracting people in 2023, both on the demand and supply sides, due to the continued strength of the employment market and consumers’ growing interest in traveling.
In other words, the performance prediction falls short of the fantastic and stunning outcomes the sector experienced in 2021 and 2022. But 2023 will mark a period of robust success for an industry that previously attained all-time high points in demand, supply, and total income and regained more quickly than traditional housing.
- AirDNA. 2022. U.S. 2023 Short-Term Rental Outlook. Retrieved from: https://www.airdna.co/blog/2023-us-short-term-rental-outlook-report. Retrieved on 18 December 2022.
- CNBC LLC. Make It. 2022. Rent Prices Will Keep Going Up In 2023—Here’s What To Expect. Retrieved from: https://www.cnbc.com/2022/09/28/how-much-higher-rent-will-go-in-2023-according-to-experts.html. Retrieved on 18 December 2022.
- Them Report. 2022. Rent Growth Expected to Moderate Further Into 2023. Retrieved from: https://themreport.com/news/data/10-17-2022/rent-growth-2023. Retrieved on 18 December 2022.