Rentals.com Company Blog

Just for Property Managers

By Amber

Though no market analyst has a crystal ball handy, understanding real estate trends and the larger economic factors which affect them can be almost as good for making predictions about the coming year.

Read on for what some experts see as the top rental property projections for 2014.

Home prices continue to rise
Last year saw a significant increase in home prices, and the upward trend will continue in 2014, albeit more modestly. At the same time, most analysts see foreclosures slowing significantly, lowering the inventory of distressed properties and bargains. That means if investors want to play, they will likely have to pay more for properties, just as potential homeowners will.

Greater supply of homes
Steadily-rising home prices and mortgage rates mean that houses will likely take longer to sell this year than last, says USAToday. Those factors, coupled with a decrease in investor activity, mean that the supply of houses will go up, checking the briskness of home sales in the coming year, which will still probably improve over 2012’s sales.

Americans on the move
Behind-the-scenes, however, a latent pool of homeowners and a deferred wave of demand may be forming. MSN quotes CoreLogic as reporting that “almost 3.5 million homeowners were lifted out of negative equity between the end of 2012 and mid-2013.”

As home prices increase and owners who were underwater start begin to see a way out, they will be selling and buying houses, then possibly relocating, many to cities in more affordable housing markets. In addition, young people who’ve been living in their parents’ basements or rooming with others until they could beef up their income might also be relocating, if the economy expands in general as some predict and delivers more jobs.

The role of millennials
According to CBS News, millennials are definitely fueling the urban growth of key cities, especially those in the Pacific Northwest, Austin and Minneapolis. But they are not yet making their presence felt as homeowners. Significantly, this group’s behavior is typically suggestive of rental trends.

For millennials who could afford to buy a home, many are choosing to rent, instead, to be closer to urban experiences or to maintain mobility. If an expanded economy begins to allow for higher wage-earning opportunities among this group, more might become homeowners in 2014.

Less new construction
As the pool of homeowners-turned-renters begins to stabilize in the improving real estate market, there may be less multifamily apartment construction, according to CBS News. During the recession, the demand for rentals from those who had lost their homes or couldn’t afford to buy surged; now, to make up for what may have been an over-build, new construction for apartment developments will slow.

So what will these 2014 projections mean for your rental forecast? As the real estate market improves, there is still a vast portion of the population waiting for its wages to catch up. Demand for rentals appears steady, especially as home prices continue to increase. But in areas where rental prices are spiking, homeownership may become a reasonable alternative. Consider the rental market in your area and watch closely. Local trends will ultimately be the most significant ones for your properties.

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