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Exploring 10 Key Trends in Single-Family Rentals in 2024

by | Apr 3, 2024 | Real Estate

In 2024, the single-family rental market is witnessing various trends. According to a report by NerdWallet, rent prices across the U.S. increased an average of 3.5% in February 2024 compared to the same period last year, with single-family home rentals experiencing a 4.8% growth. This contrasts with the growth rate of multifamily home rentals, which stood at 2.7%​​. 

As the data shows, the landscape of single-family rentals is not just growing; it is evolving rapidly. This growth signifies the importance of staying informed about the market trends that are shaping this sector. Knowing these trends is crucial for renters, investors, and real estate professionals as they explore the dynamic world of single-family rentals in 2024.

Top 10 Trends in Single-Family Rentals for 2024

1. Continuous Demand for Comfort and Space

The demand for single-family rentals is rising, especially among millennials starting families. These demographics are increasingly attracted to the suburbs because they promise more space and better educational opportunities for their children. 

The Buildium’s 2023 Property Management Industry Report highlights a year-over-year increase in household sizes, pushing more families towards rental homes as they get out of homeownership due to high property prices. This trend reflects a shift in lifestyle preferences, with more people valuing space and community over the urban hustle and bustle​​.

2. Surge in New Single-Family Home Construction

Builders are responding to the housing shortage by increasing the construction of new single-family homes, which has reached its highest rate since May 2022, according to NerdWallet. This surge alleviates the housing scarcity and introduces more options into the rental market. 

However, with home buying prices remaining high and mortgage rates only easing slightly, the trend towards renting over buying continues. This scenario presents an opportunity for investors in the rental market, even as it introduces new competition among landlords​​.

3. Technology Infusion in Property Management

Integrating technology into property management has significantly enhanced the efficiency of rental property management. About 24% of rental property owners are seeking property managers who use digital tools, reflecting a broader trend toward online rental processes. 

Using property management software, smart home devices, and automation technologies is a convenience and a necessity to stay competitive. This tech-driven approach caters to the 90% of renters who prefer handling at least some of their rental processes online, thus improving tenant satisfaction and streamlining operations​​.

4. Challenges in Finding Quality Tenants

The dynamic shift towards lower mortgage rates and increased housing availability is altering the tenant choices, making it increasingly challenging to find and retain quality tenants. 

Property managers are taking advantage of advanced tenant screening software to identify the best matches for their properties. This reduces turnover and enhances long-term tenancy. In addition, it reflects a strategic shift in the rental market, where the focus is not just on filling vacancies but on cultivating stable, long-term relationships with high-quality tenants​​.

5. Increasing Regulatory Changes

The rental market regulations are ever-changing. New laws affecting lease terminations and rental operations, such as those coming into effect in California and Denver, require landlords and property managers to adapt swiftly to stay compliant. 

These changes, while localized, reflect a broader trend towards increased tenant protections and standardization across the rental industry. Property stakeholders need to stay informed and adjust their practices accordingly.

6. Growth of Single-Family Rental REITs

Real estate investments are seeing a noticeable pivot towards single-family rental real estate investment trusts (REITs), especially as the demand for single-family homes remains high. These REITs allow individual investors to invest in real estate without needing to manage properties themselves. 

With the continuing trend of delayed homeownership, single-family rental REITs offer an attractive investment proposition. They have outperformed other REIT types in recent times due to sustained rental demand. This trend indicates a larger shift towards rental investments as a viable alternative to traditional homeownership, especially in uncertain economic times​​.

7. Focus on Affordable Housing

Considering the ongoing housing affordability crisis, the Biden administration has proposed significant funding for affordable housing initiatives, including Project-Based Rent Assistance. 

This focus aims to counteract the steep housing costs and provide more affordable living options for lower-income households. For landlords and property managers, this presents an opportunity to tap into a growing segment of the market seeking affordable housing solutions. By participating in these programs, property owners can contribute to alleviating the housing shortage while also diversifying their tenant base​​.

8. Geographical Impact on Rental Costs

The cost of renting a single-family home varies significantly by location, influenced by neighbourhood security and proximity to amenities like schools and hospitals. Properties in desirable locations command higher rental prices due to their increased demand. 

This trend is illustrated by the housing market in Miami, where an influx of new residents has led to a significant spike in rental prices due to housing shortages. This example underscores the critical role of location in determining rental pricing and demand in the single-family rental market​​.

9. The 1% Rule and Investment Returns

The ‘1% rule’ in real estate investment, suggesting that a property’s monthly rent should be at least 1% of its purchase price, remains a useful benchmark for assessing the profitability of rental properties. This rule helps investors gauge whether a property is a good investment based on rental income potential. 

However, actual profitability can depend on various factors, including maintenance costs and vacancy rates. The investment returns in single-family rentals can vary widely, with some areas offering significantly higher returns than others, as demonstrated by the varying cap rates across different regions in the US​​.

10. Demographic Shifts and Preferences

The preferences of younger generations, especially Generation Z, are markedly impacting the single-family rental market. With a preference for flexibility, space, and privacy, 43% of Generation Z prefer living in single-family rentals over other housing types. 

This shift is significant as it represents the changing demands of the next wave of renters. Landlords and property managers should note these preferences to attract and retain younger tenants looking for more than just a place to live but a place that aligns with their lifestyle and values​.

The Next Chapter in Single-Family Rentals

As we look towards the future, the single-family rental market in 2024 promises multiple challenges and opportunities. From the demand for suburban areas to the revolutionary stride of technology in property management, these trends present a dynamic shift in real estate. Investors, renters, and industry professionals must explore this sector with informed agility, balancing the scales of profitability, convenience, and compliance!