Prepare for these 3 Top Rental Trends in 2024

1: Stabilized, Slowing Rent Growth
The first trend of 2024 started in mid-to-late 2023 and is expected to continue for some time: after the past few years of run-away rent costs, there are signs the market’s finally beginning to cool.

According to The October Rent Report on Rent.com, the average national rent has gone up roughly 20% in the last three years. However, the report also mentions that while rents remain high overall, monthly rental fees have begun to stabilize. Costs are rising less quickly and, in many areas, even dropping into more predictable patterns.

This slowing growth impacts both landlords and renters. With more predictable rates, renters may feel more comfortable moving out, rather than staying put. With more renters searching for places, you, as a landlord, may have a better pool of rental applicants to choose from. However, that also means you need to know what to look for in a good tenant.

How to Prepare
.  Know how to set a fair market rent. With prices fluctuating (and some even going down), it’s important to know the market in your area. If the price is too high, you may find yourself with costly vacancies.
.  Run thorough renter screening. With more movement in the rental market, it’s easier for potential rental scams to slip through the cracks unnoticed. Having data to backup your gut feeling can help you make better rental decisions. Some common screening reports include:
.  Eviction check: check for previous eviction-related records, so you can better understand your applicant’s rental history.
.  Criminal record check: help discover if your potential tenant has a relevant criminal history.
.  Credit check: help assess your applicant’s fiscal responsibility with a look into their financial track record.

2: Climate Concerns Impact Rental Decisions
The second trend to look out for in 2024 is a global shift: renters, property managers, and insurance companies are starting to pay closer attention to climate change in rental-related decision making.

According to the National Center for Environmental Information, the number of billion dollar climate emergencies has steadily increased each year since 1980. According to the data, the instances of climate-related emergencies, their intensity, and the cost to rebuild are continuing to rise. Now, those who are stuck with the repair bill are taking notice.

A study from Berkeley Haas School of Business shows that, while localized heat shock (high temperature) does not necessarily impact rental prices in an area, sustained heat shock leads to ”a significant decrease” in the house prices in an area. This means as temperatures rise in an area, the property values drop.

While falling property values could create opportunities to snatch up a good deal, it’s also cause for vigilance. After all, it’s no use buying a cheap rental property if renters are moving away and you can’t even get insurance.

In fact, a recent Washington Post article shared how many major insurers are cutting protection due to extreme weather in some disaster prone areas, including those impacted by hurricanes, wildfires, flooding, and other natural disasters.

How to Prepare
Here are a few things you can do to help prepare for how climate-related incidents might impact your property management business:

.  Pay attention to trends in your area. Be aware of how potential renters and other property managers behave in your local market. Are many people selling Are homeowners or renters moving away Knowing how your local market behaves can help you find good opportunities.
.  Check with insurers before purchasing a property, especially in disaster-prone areas. Make sure to know if insurers provide the complete coverage you need, including climate change-related incidents.
.  Consider making all tenants carry renter’s insurance. A good practice anywhere, requiring tenants to carry renter’s insurance may help protect you against losses in the case of natural disasters, among other benefits.

3: Uncertainty in Home Values and Prices
While rental markets are stabilizing, there’s some lingering volatility in the housing market that will likely continue through 2024. Now that the period of skyrocketing home prices has cooled off, experts are split about what will happen next.

Some industry experts, like Zillow, predict a 4.9% increase in home values by August 2024.

Their prediction is based mostly on low inventory and high interest rates. This could mean good news for homeowners and landlords looking to increase rental costs, but not so great news for independent landlords looking to add another property to their portfolio.

On the opposite side, Newsweek reports that a significant drop in home values is predicted by Morgan Stanley. Morgan Stanley’s predictions are based on favorable interest rates and increased inventory. If this happens, you may be able to pick-up a new property for a better bargain. However, it may also mean renters are also taking the opportunity to buy, which could mean fewer renters in your area.

How to Prepare
What might happen to home prices is anyone’s guess. Here are some things you can do as a landlord to help prepare for this uncertainty:

.  Know how to price fair market rent in a high-inflation environment. If inflation does jump up again, it’s helpful to know how to price your rent accordingly.
.  Pay attention to your own mortgage. According to financial site NerdWallet, the Federal Reserve’s changing interest rates can sometimes impact your existing mortgage payment. Changes in what you owe for your mortgage might change your rental strategy down the line.