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Hot Sales Market Creates Low Inventory of Rental Properties By: Stevie Krumm, Broker/Owner, NextHome Excellence, Property Manager
W
e all know that the sales market right now is extremely hot! With high buyer demand and low property inventory, it has become a very competitive seller’s market.
LACK OF RENTAL INVENTORY Sales prices are increasing every month and multiple offers are received within days of a listing going live. What you might not know is that this same scenario is also happening in the residential rental market. Like sales listings, there is an extreme shortage of homes for rent in Sarasota and Manatee counties. The properties that do become available are rented quickly within a three-week average and have multiple applicants waiting in line just for the chance to apply. To some, this is the best-case scenario, while others find it quite frustrating.
INCREASED RENTAL RATES Tenants whose leases are expiring are realizing that they are stuck between a rock and a hard place. Their landlord may offer a lease renewal but at a
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newly increased rate. There are not many properties to choose from if tenants decide to move, and they are torn with the decision to renew at a higher price or vacate and play the field. They have to be ready to apply and pay up to three months’ rent (typically first, last, and security deposit) the minute a property hits the market. Landlords have recognized what is happening and are eager to raise the rent. In the past six months, rental rates have increased by 5 percent to 10 percent on annual rentals. Just as sellers are making out like bandits in the sales market, landlords are finally getting the higher returns on their investments that they’ve been dreaming of.
SELLERS BECOME TENANTS Sellers that have decided to cash in on this hot sales market are finding themselves having to be out of the home they just sold faster than they can find a new property to purchase. This leads them to think that they will be able to rent somewhere while they look for their next home. They quickly realize that they have just as little to choose from in the rental market as in the sales market. Most of the unfurnished, annual rentals have been rented. Even fully furnished vacation rentals are getting booked with local residents instead of out-of-town vacationers, and the locals certainly don’t like having to pay the taxes that are required on a short-term lease! But it seems they have no other choice. The lack of inventory of rental properties is directly related to the booming sales market. Sellers usually turn to property managers when they are having trouble selling their property. Instead of selling, they decide to lease their home in order to mitigate the costs of homeownership. Since properties are selling so quickly and for top dollar, property managers are left wondering when they will be able to build their portfolios of properties. We all know real estate is very cyclical and this market won’t last forever. Sales will eventually slow down. Properties will eventually flood the market again. Sales prices and rental rates will also come down. So, whether you are a troubled tenant or a lucrative landlord, just know that the tides will turn… someday. •
