The COVID-19 pandemic has upended many of the norms in the U.S. rental market. For both tenants and landlords, the only certain prediction for 2021 will be change.
Mashvisor took a look at what leading experts are predicting as coming trends in the 2021 rental property market. Here’s what we found.
Renters Will Continue to Leave Inner Cities in 2021
Workers who once flocked into cities to be closer to work are having an epiphany. The upsides to city life, such as dining and entertainment, are closed or being restricted. Even when open, some are discovering that it may not be worth the risk. A new CDC study says, “…a case-control investigation of symptomatic outpatients from 11 U.S. health care facilities found that close contact with persons with known COVID-19 or going to locations that offer on-site eating and drinking options were associated with COVID-19 positivity. Adults with positive SARS-CoV-2 test results were approximately twice as likely to have reported dining at a restaurant than were those with negative SARS-CoV-2 test results.”
Those whose jobs are now remote no longer need to pay the higher taxes in cities. Nor do they need to deal with congestion, poor air quality, and parking nightmares. If one cannot enjoy the upside to city living, avoiding the downside by leaving and saving a bundle is a real option for those who can work remotely. This new renting trend is having a dramatic impact on the rental market and the value of city rental properties.
CNBC reports that contracts on apartments in Manhattan dropped 80% in May. “There’s no question that there are people who are fleeing the cities. There’s no question that the second home has been a place of refuge. There’s no question people are rethinking whether they want to be in high rise rentals with common spaces as amenities vs. having a home of their own with a backyard,” said Stuart Miller, chairman and former CEO of Miami-based Lennar.
The city-center rental market is being impacted in a negative way for landlords and a positive way for renters who still want to live in the crowded downtown areas. Even if coronavirus is removed from the picture next year, the fact that many companies are embracing remote work means this rental market trend is likely to continue into 2021.
City Rental Markets Will See Further Rent Price Declines in 2021
Many are wondering “Will rent prices go down in 2021?” Well, renters are viewing cities as less desirable places to live. Particularly those who can work remotely even after the pandemic is under control. This view is putting intense pressure on rents. The Washington Examiner reports that “Of the largest 100 counties, 36 saw year-over-year declines in one-bedroom rents in September.”
Fox Business reports that two bellwethers for the health of the rental market in cities are seeing double-digit rent price declines. “San Francisco saw the prices fall the furthest in September, according to data from Realtor.com, with costs for a one-bedroom unit falling by 24.2%. The median rent for a one-bedroom apartment in Manhattan declined 15.4% year over year in September.” Coast to coast, inner-city rents are down.
Middle America’s city rent prices are also suffering. A recent list revealed the names of 10 American cities that have one-bedroom units with rents averaging under $600. These cities include Springfield, MI, Jonesboro, AR, Texarkana, AR, and Greenville, TX. Even smaller cities are becoming more affordable to renters in the age of COVID.
Owning Rental Property Will Mean Dealing with Renters Who Cannot Pay Rent
In 2020, federal, state, and local government agencies all acted to impose eviction moratoriums. This means that those owning rental property will face difficulty with maintaining cash flow and predicting the return on investment for their property. The US rental market 2021 will continue to suffer from government protections aimed at helping renters cope with COVID hardships.
It’s true that the CARES Act offers those property owners with mortgages some relief. However, this can have the unwanted effect of pumping the brakes on new mortgages. Currently, there are close to 3 million mortgages in forbearance with no solution in sight.
Suburbs Will Be Hot Locations in 2021
Those who have sold a suburban single or multifamily home in 2020 already know that the market was red hot. In 2021, expect that continue. Fast Company reports that for 2021, “The suburban growth seen over the past five years will continue, as more companies require, allow, or encourage working from home.” Those rental companies with suburban units will see rent price growth and lower vacancy rates as the rental market strengthens in suburbs.
Rental Market Regulation Will Increase in 2021
As anyone with Section 8 rental unit experience knows, the federal government does play a large role in the U.S. rental market. Once the federal eviction moratorium eventually ends in 2021, expect local agencies to move hard on rent control measures. The U.S. rental market is about to become highly regulated.
For example, in Massachusetts, legislators are not just planning state-wide rent control measures while the pandemic lasts. They are instead planning to institute rent control measures for up to a year after the emergency passes. Such measures would alter the rental market as we know it.
To summarize what Mashvisor has discovered by looking into the 2021 rental market forecast, we find these trends are most likely:
- Rental Market Regulations Will Increase in 2021
- Suburbs Will Be Hot Markets with Possible Rental Increases in 2021 (Where Allowable by Law)
- Rental Property Owners Will Struggle with Renters Who Cannot Pay
- City Rental Markets Will See Continued Softness (Lower Rent and Higher Vacancy Rates)
If you are a real estate investor looking for property in which to invest now or in 2021, let Mashvisor help you. We have the real estate investment tools to help you find, analyze, and evaluate the best available rental properties in any rental property market. Getting started is easy at this discount offer.