Average days on market nationally: the trend continues downward
The rental market in the United States is experiencing significant shifts, and landlords are sitting up and taking notice.
Recent data from ShowMojo, based on over 500,000 on-market periods spanning mid-2017 to the present, highlights a concerning trend: the average days on market for rental properties continues to rise.
This comprehensive dataset includes single-family, multifamily, suburban, urban, and rural properties across all 50 states, offering a broad perspective on current market dynamics, and it all points to longer DOM periods.
But why is this happening, and more importantly: What can landlords do about it?
Alarming Data Points
May 2024 has set a new record for the wrong reasons.
The average days on market have increased by 11% compared to May 2023 and a staggering 36% compared to May 2022. Properties now sit for an average of 36 days before being leased, up from just 25 days in 2022.
This lengthening period is accompanied by a decrease in tenant leads per property, forcing many landlords to lower rents as a countermeasure.
Contributing Factors
Several factors are contributing to this troubling trend in the rental market:
- Rising Rents: As rents continue to climb, many potential tenants find themselves priced out of the market. Those who can’t afford home ownership are also finding it increasingly difficult to keep up with rising rental costs.
- Economic Pressures: With interest rates at their highest levels since before the Great Recession, the cost of borrowing has increased, making it harder for people to afford loans for big-ticket items, including homes.
- Living at Home: More individuals are opting to live with family to save money, reducing the pool of available and willing renters.
- Quality Tenants: Finding financially stable, quality tenants has become more challenging. Many households are grappling with high debt levels, exacerbated by the end of pandemic stimulus measures.
- Residential Sales Weakness: Weaknesses in the residential sales market are spilling over into the rental sector, affecting pricing and demand dynamics.
None of these are things which landlords have control over. But you DO have control over how you react to changing market conditions.
Future Outlook
Looking ahead to the next six months, the rental market is expected to face continued challenges.
The data indicates that property owners and managers are already struggling to adapt to these changes.
Rent reductions are now at historic highs, with nearly 30% of leased listings experiencing at least one rent reduction during their time on the market. This figure is 7% higher than in May 2023 and an astonishing 63% higher than in May 2022.
And the year isn’t over yet. The winter months typically see a downturn in rental activity, and this year will likely be no exception, compounded by several economic factors:
- High Interest Rates: With borrowing costs remaining elevated, both homebuyers and renters will feel the pinch.
- Debt Levels: Households are now back at historic debt levels, reducing their ability to take on additional financial burdens.
- Student Loan Repayments: The resumption of student loan repayments is straining budgets further, limiting disposable income and affecting rental affordability.
- Medicare Enrollments: Trimmed Medicare enrollments add another layer of financial uncertainty for many Americans, influencing their housing decisions.
- Market Saturation: The conversion of short-term rentals and second homes into long-term rentals has increased supply, making the market more competitive.
For landlords, this means that leasing skills and best practices will be crucial to navigating these turbulent times successfully. Here are some strategies to consider:
- Competitive Pricing: Be prepared to adjust rents to stay competitive. Monitor local market trends and be proactive in making necessary changes.
- Effective Marketing: Utilize multiple channels to advertise properties. High-quality photos, virtual tours, and detailed descriptions can make a big difference in attracting potential tenants.
- Tenant Screening: Implement rigorous tenant screening processes to ensure that you are selecting reliable and financially stable renters.
- Property Maintenance: Keep properties well-maintained to retain existing tenants and attract new ones. A well-kept property is more likely to command higher rents and shorter vacancy periods.
- Flexibility: Offer flexible lease terms, like pet-friendly clauses, to attract renters in a competitive market. Give prospects as many self-service options as possible to streamline viewings and applications.
For more tips on how to shorten your vacancy periods, check out our article on maximizing your rental property’s competitiveness.
Navigating the Turbulence
Don’t worry, landlords. It’s not all doom and gloom.
Anyone who’s in real estate for the long haul knows that market dynamics are always shifting. The successful investors are those who know how to ride the changing tides, plan ahead, and react when needed.
By streamlining your property management, optimizing your rental pricing, and finding ways to stand out from the competition, you can minimize days on market even during these turbulent times.
Want to find out how we keep turnovers short, while still ensuring quality tenants for our clients’ rental units? Schedule a free consultation with a member of our team.