Real Estate Index: 2022 Market Predictions

In the Landlord Studio 2022 Real Estate Index we analyse our unique data sets to explore market trends that evolved over 2021, and how the market is expected to change over the next 12 months.

One thing we saw over 2021 was a number of surprising fluctuations caused by unpredictable market factors. High levels of inflation paired with supply constraints and a global pandemic have all led to sizable property appreciation shifting renter demands and an increase in renters.

With such uncertainty, it is clearer than ever that real estate investors need to have a comprehensive grasp of local market trends as well as a broader market perspective if they’re going to continue making profitable investments in the real estate market.

Outline of 2021 Market Trends

Over 2021 we saw three key trends emerging. A decrease in on time and completed rent payments, a decrease in vacancy rates, and a sizable increase in rent rates.

Rent Payment Trends

• Landlord Studio’s data suggests that towards the end of 2021, there was greater uncertainty in the rental market.
• Only 53% of tenants paid their rent on time in September 2021 compared to 62% in September 2020.
• We’ve also seen a decline in rent payments completed after 28 days reflecting the on-time payments graph for the latter half of 2021 with 78% of tenants completing their rent payments after 28 days in December 2021 compared to 81% in December 2020.

Vacancy Trends

• Vacancy rates fell during the pandemic and have stayed at historically low levels.
• Data from using the Landlord Studio system show a vacancy rate of less than 4% through out 2021.
• Towards the end of 2021 and market data from Census.gov shows an average vacancy rate of between 5.7-6.8% compared to an average of 7-8% in the years prior.

Rent Increases

We’ve also seen a relatively steady increase in rent rates across the country.

Source: Landlord Studio

Over 2021 however, we can see that in some locations the increase has been exponential.

Zumper’s national rent report notes a 12% year on year increase for single for medium one-bedroom rent. However, with certain locations such as Boston Texas, rent prices increased as much as 26%.

What do these rent collection trends mean for the future?

The general market general consensus is that real estate trends will continue to be relatively positive over the coming year. Rents are expected to increase steadily, though at a slightly slower rate, house prices are expected to continue appreciating, and vacancy rates are likely to remain low.

There are a few major factors that are influencing these trends including record inflation, massive property appreciation, and ongoing supply constraints. These factors have meant that for the last year it has remained a seller’s market. As a result, real estate has become more expensive, and increased competition from investors has left many renters unable to purchase meaning they’ve been forced to rent for longer. This in turn has increased renter demand directly contributing to lower vacancies and leading to increased rents.

Finding and vetting tenants: How to protect your investments

It is essential that investors utilise available data sources to gain a broad perspective of the market as a whole as well as dig into the local market and economic factors. Some locations across the country, for example, have seen massive growth in both property prices and rent rates as mentioned. Other locations though are at great risk of depreciation with low job availability and minimal local investment.

Understanding these market factors will allow you to charge a competitive rent rate to minimize vacancies, and should also help inform your long term investment decisions.

The primary and best way to protect your investments against an uncertain future and potential instabilities in the market is, first and foremost, to focus on securing the best possible tenants for your rentals. In order to do this, you need a system in place to find prospective tenant applicants.

Ideally, you’re looking for a tenant who will stay for multiple years and pay rent on time and in full every single month. While you can never be certain, having a comprehensive vetting and screening process can help minimize the risks.

“If we’ve learned anything from screening over 2 million tenants, it’s that good tenants make great landlords and investors. Nothing crushes a landlord’s spirit faster than a problematic tenant, and vacancies will spoil any sound investment strategy. Proper tenant screening is critical to ensuring you’re selecting good, long-term tenants to protect your investment and your sanity.”

– Steve White, CEO of RentPrep.

How To Future Proof Your Real Estate Investments

Using a system such as Landlord Studio, you can create a rental listing, collect and pre-screen tenant applicants, and easily run comprehensive tenant screening reports. We have integrated with RentPrep to make this process as easy as possible.

Once a tenant has applied, answering the pre screening questions you set, you can run a full TransUnion Smartmove report to check their credit, finances, eviction and rental history, and more, with just a tap of a button.

A final note on securing great tenants is that, once you have them, you also want to keep them. This means treating your rentals as a business and your tenants as customers. Using property management software such as Landlord Studio allows you to provide a quality service, better manage communications, set reminders for important inspections, and collect rent online.

Our online rent collection system is fast, affordable and professional. It gives you complete control over how much the tenant pays, and allows the tenant to set up automated rent payments so they never miss a payment again.

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