Last modified on February 28th, 2023
By Brittany Benz
In the past year, the residential real estate market has experienced a lot of change and welcomed new opportunities. From starting 2022 with record-high home prices to ending it with a significantly cooler real estate market, we’ve seen numerous trends shape the single-family housing industry over the last 12 months.
In this article, we take a closer look at these trends, along with some of the ongoing challenges property management businesses are facing. We also identify a few opportunities to stay ahead and position your business for success in 2023.
Top 4 trends in the single-family rental (SFR) space
1.) Owners are holding off on selling properties
The real estate market took off in 2021 and continued to surge in early 2022 due to low mortgage rates and increasing homebuyer demand. However, with ongoing talks of a recession and mortgage interest rates skyrocketing from 3% to over 7% in just one year, the housing market has cooled significantly. This also means owners are hesitating to sell their homes, with Realtor.com® reporting in November 2022 that “newly listed homes declined by 17.2% on a year-over-year basis.”
2.) Renters are delaying home purchases
With a significant housing market slowdown, record inflation, and the highest mortgage interest rates in two decades, many renters are now waiting to purchase a single-family home. In addition, many renters experienced rent increases in 2022, which has impacted their ability to afford a single-family home.
3.) Institutional investment in SFR and build-to-rent continues to rise
Institutional investment firms continued buying up SFR homes and investing more capital in new build-to-rent (BTR) infrastructure. In Q1 2022, data showed that investors accounted for “between one-quarter and one-third of home sales in Atlanta, Jacksonville, Charlotte, Phoenix, and Miami” alone. A number of homebuilders continue to expand efforts in BTR communities; Taylor Morrison, for example, recently launched its new cottage-style, for-rent home division, Yardly™.
Within the SFR market, investments in BTR communities continue to rise. However, there are some headwinds projected on the horizon. Supply chain issues and labor shortages have disrupted the industry, with continued bumps predicted into 2023. In addition, federal legislation has recently been introduced in an effort to regulate how “large companies, private equity firms, and investor-backed entities” play in the SFR space. While the Stop Wall Street Landlords Act of 2022 bill hasn’t passed yet, it’s clear that new laws and regulations may be in the not-so-distant future for large SFR investors.
4.) Single-family rent growth dips but remains elevated
January 2022 saw single-family rent growth peak, followed by steady rent growth decreases for the rest of 2022. However, despite the consistent rent growth cooldown, it remains elevated. Realtor.com® found that October 2022 saw the “lowest growth rate in 18 months, which is still nearly 1.5 times faster than the growth rate seen just before the pandemic hit in March 2020.” In addition, Arbor found that lease renewals “hit a new all-time high in July 2022, reaching 7.9%,” an unrivaled period of sustained gains over the last 18 months.
Ongoing challenges for single-family rental property management businesses
Recruitment and employee turnover have always been challenges for the industry, but the pandemic-induced rethinking of work, workplace, and workforce has only exacerbated hiring and staffing concerns.
With rental demand remaining high and a workforce stretched thin, property management teams are fatigued from doing more with less. This sentiment has been echoed by property managers across the country — in AppFolio’s 2022 Property Management Industry Pulse, 48% of respondents identified HR, staffing, and recruitment as one of their top three business challenges heading into 2023.
In addition to human resource issues, property management businesses must keep up with the consistent demands of new housing legislation and requirements.
4 ways to position your single-family rental property management business for success
1.) Prioritize building strong owner relationships: Retaining owners isn’t easy and often requires a lot of time and effort. Free your team to focus on delivering great service by automating key workflows and implementing self-service tools. When all business-critical processes are online, it’s easier to share important documents, such as customized reports, and improve communications that lead to higher satisfaction with SFR owners.
2.) Expand your network to meet new owners: Network with real estate agents or other local businesses, such as carpet installation companies or appliance stores, for possible leads on new SFR owners. Many owners only find management companies through word of mouth, so partnering with a mutually trusted business or agent can help instantly increase your credibility.
3.) Focus on marketing: The majority of renters today look online first when they are searching for a new home. By marketing your property management business properly, you can attract more leads and better tap into demand. Make a good first impression via a professional, easy-to-navigate website that uses common keywords and phrases. In addition, differentiate your business with a personalized renter experience and on-demand mobile offerings.
4.) Put technology to work: Rather than doing things manually, use technology to ease the burden on your team and give them time for what matters. Technologies like automated workflows, online leases and applications, tenant screening, virtual showings, online portals for SFR owners and renters, mobile communication tools, and more can make your employees’ lives easier and prevent burnout.
Summing it up
The SFR market has experienced drastic changes in the past two years, and in 2023 we’re likely to see more impacts on everything from rent rates to inventory and demand. While this evolution has brought new opportunities, it has also challenged property management businesses and made it harder to both keep employees happy and retain SFR owners.
By focusing your attention on building strong owner relationships and leaning on technology to deliver a better experience for both your customers and team members, you can keep your business successful in 2023 and beyond.
To learn more about how to scale your single-family rental management business, download our free growth strategies playbook below.