We’re 6 months into this year, and rental property trends are continuing to change. It’s no surprise that a public health emergency, together with political unrest and nationwide protests could cause fluctuations in the economy at large and the real estate market in specific. Successful real estate investors need to stay up to date with the latest trends in the market to be able to better cope. Now we know that a lot’s going on, and you may be overwhelmed, so we’ve put together a list of five rental property trends 2020 you need to know.
1. What you know about the “typical renter” is changing
Rental property trends are affected by renters’ demographic composition. Traditionally, for Boomers and Gen X, renting a house was the first step before finally settling down and buying a house. Today’s conditions are different because the tenant market is no longer the same. So what does the market look like?
– Millennials (Gen Y)
Millennials make up the majority of the rental market in the US and are a very small fraction of US home buyers. According to a Washington Post article, Millennials made up only 4% of all homeowners in the US in 2019. This means that the vast majority are opting to rent. Gen Y is not new to the US rental market, and landlords and real estate investors alike have seen the effects of this generation on rental property trends.
The way that Millennials are different than Generation X is that they’re less likely to buy homes at the same age their parents did. Research shows that Millennials prefer to seek opportunities, rather than settle down in their hometowns like their parents and grandparents. Along with the above, Millennials who do want to buy a home cannot afford to.
Related: 8 Things Millennials Look for When Renting
– Generation Z (Gen Z)
Generation Z is the generation born after the mid-1990s up until 2010. Unlike Millennials, who witnessed the emergence of technology, Gen Z was born into it. The generation’s impact on the rental investment markets and rental property trends is yet to be seen. Soon though, they’re going to begin looking for their own homes. And it’ll be our job to welcome them into the rental market.
Gen Z’s focus on more interactive means of communication, as well as their short attention span (8-10 seconds), means that your real estate marketing efforts ought to be different. Another important thing to keep in mind is that Gen Z is accustomed to high-end and high-quality amenities – whether it’s on their school or college campuses, or in their technology-driven lives. Entering the rental market will not change that. Landlords and real estate investors need to begin planning for a new generation of renters, one unlike any of its successors.
2. The use of technology in the industry continues to grow
This has proved especially true today, as we experience a pandemic that’s physically separated people. However, even once COVID-19 passes, virtual technology will continue to grow as we venture into the new normal. Landlords cannot resist change if they want to survive today’s fast-changing rental property trends, especially with both Millennials and Gen Z being tech-savvy generations.
How do you translate the above into the renting market? As a landlord, you’d need to adopt higher technology and upgrade your amenities. This includes digital and social media marketing and online payments when it comes to renting out your investment property. As for rental property features, today’s renters look for free Wi-Fi, keyless doors and safes, high-tech fitness and business centers, etc.
Related: 10 Real Estate Technology Trends You Can Expect in 2020
3. Even amid a global pandemic, rent prices in some areas continue to rise
Albeit slowly. Real estate investors are wondering, will rent prices go down in 2020? Initially, experts foresaw a drop in rent prices amid current conditions, but that does not seem to be the case everywhere. The Portland real estate market, Louisville, Fresno, among other markets saw an increase in rent prices and rent growth. Other cities such as Omaha and Long beach saw steady prices.
On the other hand, cities that were hit harder by Coronavirus did indeed see a fall in rental prices. It would make sense for prices to decrease in cities that are epicenters for the virus as more restrictions are imposed. Some examples include the New York City real estate market, Baltimore real estate market, Houston real estate market, Nashville real estate market, and Miami real estate market.
Traditionally, rental prices tend to go up nationwide during the spring and summer months, but that isn’t the trend this year.
Related: Will Rent Prices Go Down in the US Market 2020?
4. And so does the demand for rental property
Up until COVID-19 hit the nation, general conditions in the US economy were solid, with rising wages and strong employment. While the economy as a whole was doing well, the rental market was not losing many renters to homeownership.
Even now, during the crisis, and even as unemployment claims hit a record high since the 1940s, demand for rental property continues to increase. At the same time, supply continues to be short. This is one reason why even amid a soaring pandemic, rental prices have not been drastically affected.
5. Airbnb may disrupt the market… again
Airbnb rentals are among the most affected segments of the real estate market as the tourism industry is hit. Many experts are speculating whether Coronavirus will be the end of Airbnb. Airbnb hosts on the other hand are struggling and can no longer rely on Airbnb income as their main source of income or for a good return on investment.
During this time, Airbnb hosts face three options:
- Continue to list their rental property on Airbnb knowing they are unlikely to receive bookings
- Shift to Airbnb Online Experiences
- Forgo Airbnb as an investment strategy and move into long-term rental property investments
Many of the hosts who did not shift to Airbnb Online Experiences are now, instead, turning their short term rental properties into traditional rental properties. This is causing disruptions in rental markets nationwide. One example is the Nashville real estate market, where this drastic shift drove rental rates down.
It is true that demand continues to outweigh supply in most US cities, but this Airbnb trend may change the equation. We cannot yet foresee whether these Airbnb rental property trends will continue well after COVID-19 restrictions have passed. Even though some areas are slowly opening up, and Airbnbs are seeing a rise in bookings, some hosts may never go back to relying on short term rental properties for making money. At this point, only time will tell.
The Bottom Line
The above US rental property trends will continue to have their impact on the real estate market, well into 2021 and even beyond. It’s important to continue learning and continue adapting to changes in the market.
If you’re a beginner real estate investor, conducting rental market analysis is an important starting point. From there, be sure to analyze individual rental properties to ensure you are making a safe, high return investment. To start looking for and analyzing the best rental properties for sale in your city and neighborhood of choice, click here. Use our rental property calculator to analyze single family rental properties, multi family rental properties, Airbnb investment properties, off market properties, and more.