2016 Market Forecast: Through the Eyes of a Landlord

property management companies Sioux Falls 2016 Predictions

Property management companies in Sioux Falls offer a different take on the market trends than consumers and media outlets. While rising rent rates and other factors that impact the market are viewed as negative by consumers, for property managers, they are positives. Real Property Management Sioux Falls has compiled a list of trends that will influence the market in 2016, and the outcomes favor landlords.

After analyzing market data, we expect the following in 2016:

  • Declining Vacancy Rates.
    This has been the trend since 2009 when vacancy rates were up to 10.7%, but at the end of 2015, the nationwide vacancy rate was down to 5.12%. This number was even lower than 2014 year-end rates. In 2016, we expect these rates to begin to stabilize, but not until they drop slightly more. We also expect this to put pressure on the market’s rising rent rates.
  • Rent rates will continue to rise and outpace inflation and the cost of housing.
    At 2015 year end, the average rent rate for a 3 bedroom home was $1353, an increase of over 3% since year end 2014. As the millennial generation continues to postpone their parent’s milestones of adulthood—marriage, family, and home ownership—the result is increased demand for rental properties- a promising point for real estate investors and landlords.
  • Formation of households will increase.
    Millennials have proven their unwillingness to purchase homes due to the lack of flexibility that comes with homeownership. As the economy grows in 2016, so will the formation of households, as more millennials will finally feel comfortable leaving the nest. Most of the households formed this year will be rental houses, a fact that bodes well for landlords.
  • Profitable properties may be hard to find. In light of all the positives we just shared, the reality is that investors who have benefited from foreclosed homes turned into rental properties may have a hard time as the economy continues to bounce back. According to CoreLogic, foreclosures have dropped 24.3% from 2014, and the new and existing supply of homes is down to 5.7 months, with single family homes at 5.2 months. These rates are the lowest they have been in many years.

Wild Cards

In every business there are wild cards and the unknown factors that make running a business risky. For real estate investors in 2016, these include global economics, terrorist activity and politics during a heated election. All of these factors could play a negative role on the economy, but the benefit of being a landlord is that even if the economy does falter–people still need a place to live.

Real Property Management Sioux Falls is excited to see what 2016 brings. Don’t hesitate to contact us for all your property management needs!