The for-sale market finally seems to be cooling down a bit from its most sizzling temperatures a few months ago. In contrast, the rental market is becoming fiery-hot in housing markets across the country.
Just 58.8 percent of sales offers written by Redfin agents saw competition in August, a new low for 2021, according to a Redfin report released in mid-September. Rental bidding wars are ramping up, however, in competitive markets where inventory is low and some would-be buyers have decided to wait it out on the sidelines another several months or year.
“I can tell you, I’ve never seen anything like this before,” Adam Docktor, a Realtor with Compass in Fort Lauderdale, told Inman.
“[From] 2015 to 2019 there were tons of rentals. We had so many online, and [buildings] were not full. And now all the buildings are between like 95 and 99 percent full where people were like, ‘Oh, that’s never going to happen.’ The typical rent increase is probably 3 to 5 percent [per year]. Well, we’re seeing 20 percent in our area, which is huge but also a barrier to entry.”
As demand has intensified, so have rent prices. Although month-over-month national rent growth slowed slightly in August (to 1.7 percent in August, from 2.0 percent in July), annual rent growth hit a record high of 11.5 percent in August, according to a Zillow report.
In Irvine, California where First Team Real Estate is based, COO Michele Harrington told Inman the team was seeing “big time” bidding wars and competition on rentals.
“[There’s been] bidding up and multiple applications,” she said. “[I] had a property with 10 applications in one day [and] rents are climbing.”
Harrington said she’s seen renters offer anything from $50 to $100 more per month than the rental asking price, to paying six months of rent upfront in order to win a rental.
Docktor, meanwhile, said one of his rental homes that he listed about a month ago quickly received five applicants, and the person who ended up winning the property paid a whole year’s worth of rent in advance.
“I’ve never seen that before,” Docktor said. “Typically we advise people not to do that. Don’t go ahead and give an owner your whole year [of rent] upfront, but people have no choice in doing this.”
One factor contributing to the high demand for rentals right now, Docktor said, is the fact that established homeowners are deciding to cash out while the market is at its peak. Until they decide to re-enter the for-sale market after things have cooled down more, they’re looking for places to rent — and they have the equity and capital built up to beat out younger renters.
“[Empty nesters] have a nice house and they’re going to sell right now because the market’s at its top; they want to make the most money,” Docktor said. “The younger professionals are not going to be able to compete with these homeowners who are owning their inventory and want to rent.”
Benjamin Lipson, managing broker and property manager at Icon Realty in Fort Lauderdale told Inman that bidding wars among renters have become more frequent since the start of the pandemic when Florida was one of the few states that had limited COVID-19 restrictions, and many businesses remained open.
“A lot of people from California, New Jersey, New York were flocking [here] and renting properties sight unseen without Realtors, which for South Florida is generally uncommon,” Lipson said. “And in order to lock down those properties they were offering payments in full, several payments in advance, additional security deposits, those types of things.”
In Boston, the rental market has also gotten much tighter, especially with students making a recent return to college campuses and needing places to live.
“The amount of vacant apartments has definitely precipitously dropped,” Demetrios Salpoglou, CEO of real estate tech platform Boston Pads, told Inman.
Boston’s rental vacancy rate hit a high point of about 9 percent vacancy in September 2020. But today, the vacancy rate has nearly diminished to a pre-pandemic low of 1.72 percent, which was last seen in October 2019.
Adjina Dekidjiev, a broker at Warburg Realty in New York City, told Inman that the city’s rental market seems to be rebounding as well — and getting more competitive.
“A lot of people are coming back to the city, so I’ve seen a lot of apartments are renting really quickly,” Dekidjiev said. “I had an apartment downtown that rented in a few hours. I had 15 people show up and more than one person wanted to apply, so it’s usually first come, first serve. So, the first person that applied got the apartment.”
Dekidjiev explained that most of the measures that renters are taking to win rental properties in hot cities in California and Florida, for instance — like paying multiple months of security deposits or paying for an entire year’s worth of rent upfront — were made illegal in New York a couple years ago with the Housing Stability and Tenant Protection Act of 2019. Therefore, if the first applicant who applies for one of her rentals is qualified for it, they’ll get the unit, no negotiation or bidding up involved.
When asked about similar protections that might be available for renters in Florida, Lipson said that larger management companies with bigger portfolios and leasing agents who may not be as well-versed in fair housing laws are more likely to have some kind of “procedures in place” for multiple offer situations among renters.
“But individual landlords, they’re not subject to those requirements, nor does Florida have a state law,” Lipson said. “If a private landlord wants to accept an offer from a prospective tenant that says you want to pay $1,000 a month when we’re offering $900 a month, and they want to pay the year in full, there’s nothing against the law for the landlord to then accept that offer.”