What Can You Expect for Rental Market Growth in 2022?

The #1 question on the mind of every real estate investor right now is: what is going to happen to the housing market in 2022?

Housing market predictions are always an essential factor to consider whether you are looking to buy, rent, or sell. As we end one year with a new one right around the corner, it’s essential to understand what is going on in your local market, as well as what is happening on a national and global level.

In this article, we’ll take a look at some of the factors we are thinking about as they pertain to the housing market. Keep reading to learn more about what to expect in 2022 and beyond.

The Future of Rental Market

The prediction for the future of the rental market is that the low mortgage rates paired with low unemployment rates will ultimately help keep the housing market alive. However, finding the necessary supply to feed the demand might become a challenge of the future.

Why Are Prices Rising?

Because of the challenges with limited inventory and steadily increasing demand, the market is seeing bidding wars. As such, selling prices continue to rise at astronomical rates.

The rising prices are directly associated with a combination of the shortage of housing supply, low mortgage rates, and buyers looking for more space.

Millennials Remain Relevant

Although Gen Z is entering the rental market, it’s essential not to forget about the Millenials. Today, Millennials are 24 to 39 years old and hitting the age of purchasing their first homes. However, due to the limited supply and increasingly high home prices, it will not be surprising to see Millennials continue to hold off on their first home purchase.

Beware of Rent Control

With the increasing rent prices, it might not be a surprise to see rent control spreading like wildfire across the country. While currently, only four states have rent control, experts predict this to change in the upcoming years.

Construction Prices Remain High

Construction rates are expected to remain high as the housing market demand stays sky high. There is the possibility of renters shifting into first-time homebuyers if construction begins focusing on entry-level, affordable products.

With this increased focus on entry-level homes, more supply will be entering for investors to swoop up. As such, the rental market may begin to soften shortly. Between the two factors, there is a chance that the overall demand for rentals may decrease.

The Housing Market’s Current State

The rental market across the United States has been strong over the past seven years. As home prices plummeted, foreclosures rose, and mortgages became harder to obtain, demand for rental properties increased dramatically. 

Why the Huge Demand for Rentals

Even today, after the market has cooled a bit, vacancy rates remain down, and rental rates – and income – remain high. And while some predict a steady demise of the rental market as the housing market heats back up, there are several indicators that the nation’s rental market will stay vital for the foreseeable future. 

Younger Homeowners Are Buying Fewer Homes 

The American Dream, for decades, was to buy a home. Now, though, younger homeowners – burned by the worst housing collapse in American history – are understandably leery of taking on a mortgage. 

Homeownership as a whole fell by 1.7% from 2009 to 2012. Also, the number of new homebuyers aged 29-34 dropped by 50% from 2009 to 2011. 

Younger generations are vital because they are the only way to replenish the demand for home buying that passes away steadily as older generations age. If they do not purchase as many homes, demand lags – and rental demand increases. 

Student Loan Debt Is a Major Obstacle 

One big reason why young people aren’t willing to buy homes is that they can’t – thanks to stifling student loan debt. For people aged 25 to 34, unemployment is over 9%, and the average debt load is $25,000. That can keep many from taking on yet another debt obligation, which means they have no choice but to rent after graduating. 

Even those without significant student debt might have other forms of debt due to the recession that keeps them from wanting to take on even more. 

As a result, younger Americans fuel a rising demand for rental rates that coincides with a growing apprehension about buying real estate for personal use only a few years removed from the housing bubble’s demolition of 2007. 

Rental Market Statistics

At present, more than 33% of Americans rent their homes. These statistics also show that the younger renter generations are renting for more extended periods and more frequently as the housing market trends unfavorably for younger generations.

Other shocking rental market statistics include:

  • 41% of renters pay more than 35% of their income on rent
  • Rental rates have increased by 31% in the last ten years

Top Cities for Rent Growth

Year over year, the following U.S. cities have seen the most significant growth:

  • Las Vegas, NV: 45.6%
  • Buffalo, NY: 41.8%
  • Scottsdale, AZ: 36.8%
  • Detroit, MI: 31.4%
  • Tucson, AZ: 28.8%

How the Pandemic Affects the Rental Market

The pandemic has shifted the demand in the rental market towards single-family houses. More and more, as companies are allowing employees to work remotely full-time, people are seeking out the small town and suburban lifestyles.

Is the Housing Market Going to Crash in 2021 and 2022?

Already as 2021 progresses, we’ve seen the market begin to cool down a bit. In August, national real estate agents hit their average low for the year.

While the competition is slowing, the prices are not anticipated to decrease anytime soon. All in all, experts believe that no signs are indicating the housing market will crash at the end of 2021 or 2022.

For investors positioned to take advantage of what should remain a solid rental market, the next few years could be more profitable than anticipated.

Final Thoughts

There are plenty of factors that go into housing market predictions, which is why it’s essential to take a look at everything. If you are trying to figure out how rental market growth will stay strong into the future, you must look at the housing market. After you learn all about the predictions and ready to buy a house check all the steps of the buying process.

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