Written by: Jon Harman
In the earliest days of COVID, the outlook for the housing market painted a bleak picture. As the pandemic upended everything from the supply chain to the workplace, it also changed the way that people interact with physical spaces. It drove demand for many different types of space down while unemployment rates soared, hitting a record 14.8% in April 2020.
Headlines warned that the pandemic economy could burst the “big-city rent bubble” and there was a great deal of talk about the burden that landlords and property management firms would shoulder. Experts cautioned that the pandemic would quickly lead to unpaid rents, evictions, and revenue-crippling vacancies.
No doubt, there have been hardships along the way. But the rental market has remained far more robust than anyone anticipated it would. Although renters did move away from certain expensive urban areas, the rental market across the country has been incredibly active for the most part. This is due largely to federal programs like stimulus payments and unemployment support combined with the flexibility that property managers extended to keep many renters in their apartments.
Today, the housing market is experiencing unprecedented challenges with limited inventory and incredible demand. Renters and buyers alike often pay well over the asking price, with bidding wars driving prices up further. This begs the question: How can you support assignees in today’s landscape?
What Are Some of the Factors Leading to Increased Demand for Rentals?
Once upon a time, renters had the luxury of taking their time and “thinking it over.” For many, that option no longer exists as the rental market becomes increasingly tight across the U.S. Housing prices are soaring, impacting buyers and renters looking to move as the pandemic eases. Across the board, rent prices increased by 9.2% during the first half of the year, tripling the pre-pandemic pace, and that’s not just in major metropolitan, high-rent urban centers like New York City, San Francisco, or DC.
In some parts of the country, rents are getting hiked up by 33%. For example, CORT has produced rental market alerts for clients with moves to places like Bozeman and Missoula, Montana, both of which are experiencing record-low vacancies and record-high rents.
Many landlords and property managers are increasing rents where they can help offset their losses from the COVID eviction moratorium, knowing that demand will support the higher rental rates. And it’s working. Bidding wars — once the norm only for buyers — have become relatively common in the rental market too.
What is driving this increased rental demand? There are a variety of factors at play, all combining to create a record-breaking market in many areas.
Offices Are Opening Back-Up, Young Adults Are Moving Back Out
Millions of Americans, including 52% of young adults between the ages of 18 and 29, moved in with family members because of the disruptions caused by the pandemic. The number of young adults moving in to live with their parents reached numbers higher than those during the Great Depression. Research from the Current Population Survey suggests that this move was short-lived.
It worked out well for younger employees with jobs that went remote. Now that offices are opening back up for at least part of the time, these young employees are moving back out. Many of them have more disposable income at hand due to their ability to save on rent over the past 12+ months, giving them the flexibility to move from units they shared with roommates to single units. They’re also able to opt for upgraded rentals compared to the units they lived in previously.
Millions of New Graduates Have Entered the Market
While many college students struggle to make up for what many consider “the lost year,” two graduating classes have hit the job market. This represents nearly five million people, many of whom are employed and moving to live closer to their workplace. A large percentage of these graduates are entering the rental market for the first time, driving demand further during this time of limited supply.
College Students Feel More Comfortable Off-Campus
An estimated 25% of college students decided to postpone their education last fall, most choosing to stay at home with family. As the pandemic is seemingly winding down, many students are returning to in-person learning. However, many are opting to rent off-campus apartments because they feel safer than densely populated on-campus dorms. This is creating spikes in demand that spills over into the municipalities surrounding colleges and universities.
Homeowners and Property Owners Cashed in on the Hot Market
It’s a hot market and sellers are often closing deals well above asking prices. That has led many property owners to sell the single-family homes that they rented out previously. At the same time, many homeowners looking to cash in on the hot seller’s market are now entering the rental market themselves while they wait for prices to stabilize and/or they figure out where they want to live.
Buying Isn’t an Option
The rental market was born to serve the needs of those who can’t compete for buying homes or condos. It’s a hot seller’s market, with home prices growing by more than 17% in June 2021 compared to the prior year. More than 50% of homes end up selling for more than the asking price. This edges some potential buyers out, particularly with the bidding wars going on. In turn, demand for rentals continues to increase. For assignees, buying won’t necessarily be a viable option depending on the length of the assignment because they might not recoup the purchase price when it comes time to sell.
Why Re-Imagine Relocation with CORT Rental Assistance?
Many Americans view moving as more stressful than having children or getting divorced, according to a recent survey. The current rental market makes it even more so. The “now normal” doesn’t allow assignees to leisurely look through available listings and head out on a weekend afternoon to look at multiple apartments for consideration.
Vacancies are low. Renters must stay on top of listings, monitoring them daily so they can view whatever becomes available within 24 to 48 hours tops. Otherwise, they’ll likely miss out on the opportunity altogether since rental units are moving so quickly. With all the attention and effort that renters have to put into their rental search, they can’t perform at 100% at work.
We believe that everything is possible through service. Leave finding a property to people who do it every day, not every few years. CORT is a trusted partner in the relocation industry. Since we were founded in 1972, our business has been built around helping people who are in transition.
Working with a professional helped Emad Marhoum focus on his work instead of his rental property search.
“I would like to thank you and Eva for the service provided, it really exceeded my expectations. Everything went perfectly and on time starting from my airport reception and house hunting till getting my driver license last week, which reflects a professional coordination. Also, I want to say special thanks to Eva as she went extra miles on each step on the process by communications and following up. She is brilliant, professional and I enjoyed working with her.”
CORT’s Destination Services team can work with local property managers to secure a short-term rental, which we can then furnish for employees so they can comfortably move into their new rental property. Once the assignment is done, CORT will collect the furniture, and the employees can return to their homes quickly, eliminating the time, effort, and costs needed for a full-fledged move.
Providing rental assistance may not have been the norm in the past. While things are hopeful as the economy rebounds and offices start reopening, today’s cutthroat rental market makes moving for work more stressful than ever. If you want to support assignees in the now normal, it’s time to consider including rental assistance for anyone moving to or within the U.S. Re-Imagine Relocation with CORT Destination Services.
Jon Harman is a Global Account Manager at CORT where he works closely with CORT’s operations teams to develop projects and initiatives that raise service levels and help clients to improve the efficiency and effectiveness of their relocation programs. Jon has seen the relocation world from both sides. He spent eight years as an expat running a DSP in Europe and the Middle East and he also experienced two international moves with his wife and three children. Connect with Jon on Linkedin.