At the beginning of the global pandemic last year, consumers saw what eventually became a “perfect storm” in the real estate market. The Federal Reserve dropped interest rates on loans to historically low levels to combat coronavirus slowdowns and increasing unease over its economic effects. People interested in buying homes took advantage of those low rates to make purchases.
Unfortunately, there was already a low inventory of homes available for sale, and the pandemic reduced the available pool of properties even more. This caused a phenomenon where homes were selling the same day they were listing, and buyers were willing to go above and beyond the asking price to make the purchase happen.
While this was great for home sellers, it also had a trickle-down effect on the home rental market. Landlords with rental properties started increasing rents or selling properties—even while tenants were still under contract—to take advantage of the market conditions. Some landlords were also forced to sell their investment properties while the eviction ban was in place to recuperate their losses, making it increasingly more difficult to find homes to rent.
In addition, construction projects on new housing opportunities, including apartments, have not been able to keep up with the demand. Increasing raw material costs and supply chain disruptions caused by port closures during the pandemic made it difficult to get building materials and have increased building costs, which are increasing rent costs once projects are completed.
According to RentCafe.com, the average rent for an apartment this year rose to $1,295 per month—an 18 percent increase over the same timeframe last year. Renter-occupied homes represent 40 percent of the total occupied home units. The Hampton Roads Market Summary for July 2021 released by REIN shows that the Month’s Supply of Inventory—the amount of time it would take to sell every available home on the market if there were no new homes added—was down year-over-year by 32.88 percent. In July 2020, Month’s Supply of Inventory was 2.19 months versus July 2021, where that number was just 1.47 months.
In the meantime, renters looking for spaces are on waitlists that often go three to four names deep, and they are often willing to pay a premium for rental spaces out of desperation to find a place to live while the rental home market continues to shrink.
“We’ve had some improvement over the summer, but I think the real loosening up is not going to happen until we get closer to the end of the year,” said Kim Finely McElvein, an agent with Swell Real Estate. “It’s going to start equalizing a little bit, but it’s going to be incremental, especially for renters. It took us two years to get here. It’s going to take us that long to come out of it fully.”