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The Impact of Rent Demand

non-owner-occupiedAs the rental market experiences price and demand increases, landlords are beginning to cut back on many “perks” originally intended to entice potential renters. According to Zillow, just 1 in 100 rental listings currently show any kind of move-in special, CNBC’s Diana Olick reports.

Additionally, rent prices are up 3.1% year over year, to a median rent of $1,530 nationally, the highest level since August 2017.

“This potentially signals more rent growth is to come, as landlords not only reduce incentives to move but also increase prices,” said Joshua Clark, economist at Zillow’s HotPads on CNBC. “Of course, all real estate is local and deals are becoming more common in some places.”

A few metroes have gone against this trend, including Orlando, Florida, as well as Boston San Jose, and Atlanta, where rental “concessions” have doubled or even tripled.

“Renters are also still likely to see concessions on the higher end, where supply is more plentiful nationally,” said Olick. “Construction of multifamily apartments surged over the past five years, but largely in the luxury sector. Developers have had trouble building more affordable housing because of higher costs for land, labor and materials.”

While renting has been heating up, demand for homeownership has been waning, according to the latest national index produced by the Florida Atlantic University (FAU) and Florida International University faculty.

“The opportunity to generate greater wealth by renting and reinvesting puts downward pressure on the demand for homeownership and prices should follow sooner rather than later,” said Eli Beracha, Ph.D., real estate economist, and co-creator of the Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index.

Of the 23 metros tracked on the index, data indicates that 19 are in rent territory. This means, that on average, an individual family in these cities would be better off renting and reinvesting in a portfolio of stocks and bonds as opposed to building wealth through equity accumulation from homeownership.

About Author: Seth Welborn

Seth Welborn is a contributing writer for DS News. He is a Harding University graduate with a degree in English and a minor in writing, and has studied abroad in Athens, Greece. An East Texas native, he also works part-time as a photographer.
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