Where Are Your Renters Moving Out To? Other Rental Properties!
So Why Aren’t They Just Staying Where They Are?
Every month, hundreds of thousands of leases end around the nation, and hundreds of thousands of renting families have to decide whether they’re ready to move into an owned home or whether they’re going to keep renting. Most of them are choosing to remain in the rental market, as evidenced by the fact that rental demand is steadily rising. So if not that many people are switching from renting to owning, it follows that if your renters are moving out, they’re moving to someone else’s rental properties.
The Hard Numbers
Mortgages are getting harder and harder to obtain as various new rules come into effect, and as such families that would have moved to owning even at this time last year cannot. The trend isn’t showing any signs of slowing down, either. A study by Zelman & Associates reports that of single-family renters that move:
- 48% move into another single-family rental house,
- 34% purchase a single-family residence,
- 8% move into an apartment,
- and 8% move in with family or friends.
In other words, 56% of renters (plus some unknown percentage of those moving in with family or friends) remain in the rental market when they move out.
Are there factors that further affect those numbers? Absolutely — age is a big one. Retirement-age renter households are significantly more likely to remain renters than younger households. This is likely because to a retiree, it can be more valuable to gain income by renting out their home than it is to move back into it. (Essentially, if they make more by renting out their 2,000 sq. ft. home than they pay to rent an 800 sq. ft. apartment, it’s a win as far as their pocketbook is concerned.) Meanwhile, of course, it’s optimal in many young peoples’ minds to move into home ownership early while they still have plenty of life left to pay off a 30-year mortgage.
Rent Isn’t Easy to Afford, But It’s Still the Best Option for Many
Reuters reports that as of May, the apartment vacancy rate in the U.S. is a mere 4.0% — the lowest it’s been in a dozen years. Rents are rising due to competition and demand, but with the mortgage market being simply unavailable to millions of families, there’s simply few other options. The struggling economic recovery is helping, too, offering slowly-rising average incomes that are partially offsetting the increase in average rent.
So What Does This Mean for Me?
The short-term upshot for property managers everywhere should be self-evident: if someone is moving out of your property and they’re moving into a different rental, it’s because something about your rental didn’t please them as much as they believe the new rental will. Part of this is undoubtedly “grass is greener” syndrome, and part of it is going to be beyond your control (such as tenants moving closer to a new job.)
But that doesn’t mean that there aren’t things you can do to keep those renters. Offer valuable incentives, make paying rent easier, appeal to your audience no matter their age, and of course pick good tenants in the first place. Most of all, talk to your tenants! If you’ve got a good tenant and you don’t want to lose them, tell them! It’s the first step to figuring out how to keep them around.