Rental prices have risen an incredible 20% over the past three years, but earnings have only risen 10%. This disparity has created a challenging situation for many renters and creates a housing dynamic that real estate agents want to pay close attention to. As an agent, the better you understand the trends that have emerged in the rental market, the better you will be able to discuss the relevant issues with your clients and continue to provide clients with outstanding real estate service.
Impact of Higher Interest Rates
Higher interest rates have had a significant impact on the number of people looking for homes to rent. With the rates this high, it means that each home buyer has less buying power. It becomes more difficult for potential home buyers to enter the market, with many electing to continue renting until interest rates come down and their money can go further in their purchase. These renters will often use this opportunity as a chance to save money for their down payment and enter their home buying experience with more confidence.
Renting allows potential home buyers to observe the market before they make the decision to buy. They can wait out the high interest rates until they fall and they can secure a more affordable mortgage. Although this strategy makes sense for individual buyers, it also keeps the number of people in the rental market high. With more people interested in renting properties, the larger demand increases the pricing. This has been particularly true in areas impacted by an influx of pandemic-driven people looking to live in desirable areas while they work remotely.
Cities that Have Experienced a Drop in Rental Prices
As new residents arrived in various cities and regions throughout the country, they helped drive up rental prices, making things difficult for everyone in the rental market. This included some cities that had previously been seen as cheaper alternatives to more expensive neighboring cities, with rental prices increasing there as well.
However, the trend has slowly begun to shift. Some areas have begun to see price increases slow down a bit, while other cities have actually started to see a decline in rental prices. Specifically, the following cities have seen rental rates fall over the past year.
- Riverside, CA
- Las Vegas, NV
- Sacramento, CA
- New Orleans, LA
- Phoenix, AZ
- Tampa, FL
- Jacksonville, FL
- Austin, TX
The largest drop, in Riverside, CA, saw a full 5.5% decrease.
The Impact of Falling Rental Prices on Real Estate Agents
It is important to note the value of patience at this point in the rental price shift. This is particularly noteworthy as the number of buyers has been constrained by factors like the high-interest rates and the low inventory levels available to particular renters at this time. This will remain an important trend to monitor moving forward so that agents can provide their clients with the latest information and the best possible advice.
As a real estate agent, you want to provide clients with information that is highly relevant to their particular situation, such as their motivation for renting versus buying. Know which factors they will want to follow, such as price drops on homes or rentals, the lowering of interest rates, and other factors that will play a role in their ability to make a home purchase.
To constantly do your job well as a real estate agent, it’s important to stay up-to-date on the latest real estate trends. This is a critical part of providing optimal service to your clients and building trust with those who may decide to buy a home from you in the future. Keep the conversations and information flowing. This will help you cast yourself as the local real estate expert to trust and partner with in the future.
The Importance of a Long-Term Relationship
With the current turbulent rental market and all the factors impacting trends and prices in the home-buying sector, buying a home is not necessarily a straightforward process. Clients might know that they have a long-term goal to buy a home but are worried about being saddled with higher interest rates, meaning the process might take longer than usual. You also want to take into account the importance of building a solid relationship with clients so that you can work towards repeat business and network referrals.
Taken together, this means real estate agents need to keep their eyes set on the importance of working with clients for the long haul. Clients want to see agents that will work with them for an extended duration, at least until the market stabilizes, and who will be there for them years down the line when they potentially have additional real estate questions.
Launch Your Career with Colibri Real Estate
As an agent, you want to continually look for ways to improve the way you do business so that you can better engage and help your clients. Continuing education can be the perfect opportunity. With a quality continuing education program, you gain access to features like expert instruction and the chance to focus clearly on best practices within various areas of real estate. This knowledge will help you have the sustainable type of success as a real estate agent that we’re all looking for.
Ready to take your real estate career to the next level? Get started with our online courses to prepare for your license exams, upgrade your license, or enhance your skill set. Colibri Real Estate has helped hundreds of thousands of real estate agents and brokers throughout the country. Contact our team today to learn more.