By the end of this year, every major metropolitan market is expected to see positive rent growth, said Jay Lybik, national director of multifamily analytics at Costar. That’s the takeaway from a recent Wall Street Journal article that was exploring the negative issues surrounding inflation and rising housing costs including rents. Read the full article here. We’re Headed Toward a Landlord-Friendly Era. Expect Higher Rent Prices.
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All that Glitters Is Not Gold, and that Holds True for Rising Housing Costs Such as Rental Rates
While smaller landlords may cheer rising rents, it’s really falling interest rates that they should be hoping for. This isn’t 2020 and there is not a lot of room for rents to increase without dramatically boosting inflation. That typically motivates the Federal Reserve to raise rates. Homeowners have been feeling the pinch of higher carry and repair costs for their primary residences for a while now. Recently, the variable costs associated with the rentals they own such as maintenance, taxes and insurance have pushed a huge number of investments into the “poor return” category. It seems to us that rising rents are just as likely to be offset by rising costs, which has been the case since late 2023 in the few markets that had rising rents.
Unlike 2020, There Is No Slack In the System
In our view we really need to see interest rates abate before we can see profitability in rental investment housing return anywhere close to 2010 levels. That is unlikely to happen unless we have a major recession which is looking more and more likely. Without it, rising rents are probably going to feel more like stagflation and weigh heavily on renters and smaller mom and pop landlords.
What This Means for Residents and Real Estate Agents
Residents should be aware that as the market shifts, so might rental rates. This makes budgeting and informed decision-making more crucial than ever. For real estate agents and vendors, the evolving landscape opens up new opportunities to assist clients in navigating these changes:
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Final Thoughts
In summary, the forecast for positive rent growth is a call to action for all stakeholders in the property management and rental market sectors. It’s an opportunity to optimize strategies, improve services, and enhance community safety. As we navigate these changes, maintaining a conservative outlook and prioritizing sustainable growth will be key.
As we move forward, remember that a well-informed, cautious strategy will help secure a bright future for all involved in the rental market.
