Right now is a good time for investors interested in rental properties to sit up and take notice: renters nationwide are staying put in a squeaky-tight housing market in which rentals account for just 0.7% of the total housing supply.
A study released last week by RentCafe.com showed that during the first half of the year, vacant apartments across the U.S. were filled within 35 days on average, with 14 renters competing for one apartment to secure a lease.
Not only that, 95.5% of rentals were occupied during the January-to-June period, as nearly two-thirds of renters opted to renew their leases rather than move into a new apartment or become homeowners.
Researchers at RentCafe, a nationwide research platform, analyzed Yardi Systems data from market-rate large-scale multifamily properties of 50 units or more. The data spanned 102 rental markets in the U.S. and excluded fully affordable multifamily properties.
Researchers ranked the markets based on a market competitive score, which they arrived at by ranking each market according to five metrics and their averages for the first four months of 2022:
- How many days rentals were vacant
- Occupancy rate
- How many prospective renters competed for each apartment
- Lease renewal rate
- The share of new apartments completed, as a percentage of the overall apartment supply in each market.
They then compiled an average ranking by assigning a percentage weight for each metric.
The study found that a steady influx of renters has sparked red-hot competition in regions across Florida. Although apartment supply grew by nearly 2%, this has not kept up with the increased demand.
Competition is intense in the Northeast as well. In New Jersey, for example, demand is coming for renters looking for alternatives to New York’s increasingly expensive rental market. On the West Coast, Los Angeles renters on tight budgets are surging into Orange County, which boasts a more relaxed lifestyle, cheaper entertainment and a thriving economy, as well as many Fortune 500 and 1000 companies seeking professionals.
Investors shouldn’t count out smaller markets, which are in their own competition, according to RentCafe.com. Take Fayetteville, Arkansas, the most competitive small rental market. The occupancy rate stands at 98% and the lease renewal rate at 77%, and apartments remain vacant for just 15 days. In Lehigh Valley, Pennsylvania, the lease renewal rate clocked in at 81%, the highest rate among small rental markets.
See the gallery for the 12 most competitive rental markets in the U.S.