What does the 2016 rental market have in store for landlords and real estate investors across the nation and in North Carolina? According to rental market predictions for 2016 from a host of real estate news and property management news outlets, the nationwide trends point towards a strong rental property market in 2016. The rental market in the Triangle region of North Carolina mirrors those trends. In today’s property management article, we’ll share the reasons behind these predictions and provide a glimpse into what landlords can expect to see with 2016 rental trends in Durham, Raleigh and Chapel Hill.
Demand for Rental Housing Continues to Rise
One reason many property managers and real estate professionals are predicting a strong 2016 rental market nationwide is because the demand for rental housing continues to rise. There are at least three major contributors to rising rents according to these professionals. First, rising home prices in the residential real estate market are outpacing rising rents. Second, single family rental home supplies are dwindling as many landlords are putting their investment properties up for sale. Third, rental vacancy rates are the lowest they have been in decades.
Rising Rental Rates in 2016
The second rental market prediction which points to a strong rental market in 2016 is the nationwide trend towards increasing rental rates in 2016. How much should landlords expect rents to increase in 2016? Based on answers provided by two-thirds of 500 property managers who responded to a national survey, Forbes magazine reports “rental rates could rise by an average of 8% through next year.”
Remember, as a landlord, you should not raise rents indiscriminately. Instead, you will want to understand what that market will bear. Red Door Company’s understanding of the local rental market enables us to successfully market your property at a monthly rent which maximizes rental rates, minimizes vacancies and attracts high-quality tenants.
Millennials Choose Renting over Buying
According to the U.S. Census Bureau and as reported by the Pew Research Center, “the ‘Millennial’ generation is projected to surpass the outsized Baby Boom generation as the nation’s largest living generation in 2015. Why is this important information for real estate investors who own rental property? In the same property management survey previously quoted by Forbes, “45% of property managers have noticed an increase in the number of millennial renters.”
Property management professionals believer millennials are choosing to rent instead of buying a home – not only for the flexible lifestyle – but because of financial reasons. Millennials often have high student loan debts, face limited job availability and bring home lower incomes which makes renting the more affordable option.
North Carolina Triangle Area Rental Trends in 2016
How do these national rental market predictions for 2016 compare to what is happening with the North Carolina rental property market here in the Triangle region. Much of what has been predicted by the “experts” is also playing out here in Raleigh, Durham and Chapel Hill.
As we see a significant increase in home sale prices and as banks continue to make it difficult to obtain financing for home purchases (home buyers often need 10-20% down payment which translates into $20-40k on a $200k home), there has been a strong increase in demand for rental units. This was predicted several years ago and is evidenced by the large increase of apartment complexes that are being completed or nearing completion in the Triangle region.
Additionally, there is continued pressure on the rental market due to reduced supply of single family units available to rent. The limited supply of rental homes comes as the result of reluctant landlords (those who were forced into the rental market in the 2008-2010 financial crisis) trying to sell their assets during the residential sales market price increase. These homes are typically in the mid-market rental range of $1100-$2500/mth which rental market trends show is an ideal rental price range for attracting quality tenants.
Due to the limited supply, rental rates in the mid-market are up across the board with emphasis on location and nearby amenities helping to drive desirability and price. At Red Door Company, we are seeing strong demand for properties in this mid-market range. While the market is not quite at the bidding war stage between tenant prospects as of yet, landlords could possibly see this type of competition in the near future.
If you want to take advantage of this strong North Carolina rental market, contact us here at Red Door Company. It would be our pleasure to show you why our landlord clients say working with Red Door Company is The Right Way to Rent®.
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