The last several years have been a roller coaster experience in the residential rental market. We experienced soaring rental prices and high demand from 2021 to 2022 and observed a noticeable cooling of rental prices and slowing demand in 2023. There are distinct factors that have caused this disruption in the real estate rental market and we believe these are important issues to consider as we look toward 2024.
MARKET RISE
Two factors led to a shortage in the supply of single-family rental properties here in Florida during and after the pandemic:
- A significant population migration to the state of Florida, whose economy stayed open during the pandemic.
- A distinct movement pattern from urban to rural areas as people experienced the freedom of more remote work possibilities.
The NY Post reported more than 655,000 people moved to Florida between 2020 and 2022. By comparison, New York City lost over 468,000 residents during that same time period. This increase in housing demand pushed rental rates up by 20% between March 2020 and April 2023, with rents reaching their peak price point in August 2022, as reported by rent.com.
SUPPLY MEETS DEMAND
During this same period, the building industry responded in force to that increased demand and subsequently is producing a tremendous influx of new multi-family complexes. The release of these units with luxury amenities and move-in incentives (we saw one local complex offering as much as 6 months free rent to new tenants), has noticeably affected the demand for single-family rentals.
MARKET SLOWING
As supply has begun closing the gap with demand, we’ve seen rental rates and demand in the market slowly cooling, most noticeably over the past 6 months. Rent.com reports that national rents have fallen for the past 15 consecutive months, with Florida rents down by 4.15% year over year.
LOWER RENTS
Market rents reflect a number of factors affecting the rental population:
- Less Remote Work – Companies and businesses are returning to pre-pandemic expectations for their workforce, with less availability for remote work and therefore less flexibility with housing location versus company headquarters location.
- Multi-Family Housing Increase – As more apartment buildings become available offering housing opportunities for hundreds of residents per complex, there is increased downward pressure on the demand for single-family rentals.
- Affordability Issues – The explosion of rental rates over the past couple years have risen far beyond any wage increases during the same period, pricing minimum-wage earners out of Florida’s median rental rates.
2024 PREDICTIONS & SUCCESS
Most predictions regarding the rental market for 2024 show a continuing decrease in the price for single-family rental homes. Is this cause for concern? We don’t think so. Success in the residential property management industry requires being adaptable and making necessary changes in the approach to the pricing and marketing strategies for rental properties that are appropriate to the current market.
What we see moving forward into 2024 is the real estate market continuing a slow correction towards pre-pandemic norms. We see some correlation between the market upheaval over the last several years and the real estate boom of 2008 and the subsequent market correction that followed. Having weathered that previous real estate disruption, this current market slowing isn’t anything we haven’t experienced before. We have confidence that our owners can still experience great success with their rental investments in 2024.
SUCCESS WITH INTENTIONALITY
Based on 35+ years of experience in the industry, we believe your rental investments can still provide successful gains in 2024 by focusing on these key principles:
- Hyper-attention to market rents and proper pricing of vacant units and lease renewal increase percentages. Owners cannot expect to rent vacant properties or to renew leases for the same rates we’ve experienced the last couple of years.
- Laser-focused attention to prompt maintenance repairs, and willingness to complete necessary property upgrades to remain competitive in a market flush with incoming brand-new, multi-family and build-to-rent construction.
- Responsiveness to potential applicants and current residents can mean the difference between attracting and retaining long-term, happy residents. Exceptional customer service is always a winning strategy.
- Knowledge of federal, state and local regulations governing landlord/tenant law ensures your lease agreements and other management policies are in line with fair housing standards and are competitive with industry best practices.
Effective management of your investment property by our experienced Property Managers will give you and your property an edge over less experienced management companies and self-managed properties in 2024. Knowing your market, adapting to the ever-changing economic conditions, and looking at the long game through an experienced and comprehensive lens will give you the best chance for success with your investment assets in the coming year.
We look forward to working with you to achieve your investment goals in 2024.
