'I've Never Seen Anything Like This'
Just as the fall brings a crisp cool to the air, agents prepared for the next season of the Nashville's housing market know that we are far from cooling down, but there is still a slight chill that can be felt.
What's causing this slight chill?
Perhaps it's the fiery-hot rental market that is responsible for us feeling a temperature spike at all.
Sales Offers Hit Lowest in a Year
According to a Redfin Report released in mid-September, just 58.8% of sales offers written by Redfin agents saw competition in August, a new low for 2021. In competitive markets, such as Nashville, where the average buying of a dwelling may include thirty offers in addition to $10k+ over in offer, some would-be buyers have had no choice but wait to wait on purchasing.
“I can tell you, I’ve never seen anything like this before,” Adam Docktor, a Realtor with Compass in Fort Lauderdale continues: “[From] 2015 to 2019 there were tons of rentals. We had so many online, and [buildings] were not full. And now all the buildings are between like 95 and 99 percent full where people were like, ‘Oh, that’s never going to happen.’ The typical rent increase is probably 3 to 5 percent [per year]. Well, we’re seeing 20 percent in our area, which is huge but also a barrier to entry” [Source].
Docktor also reports that a tenant who won a rental listing he had paid a whole year’s worth of rent in advance just to secure the listing.
Docktor's theory on the high demand from rental is based on the fact that "that established homeowners are deciding to cash out while the market is at its peak. Until they decide to re-enter the for-sale market after things have cooled down more, they’re looking for places to rent — and they have the equity and capital built up to beat out younger renters."
California is also seeing such trends. Michelle Harrington, a realtor from Irvine says she’s seen renters offer anything from $50-$100 more per month than the rental asking price, to paying six months of rent upfront in order to win a rental. According to a Zillow report, annual rent growth hit a record high of 11.5% in August, although month-over-month national rent growth slowed slightly in August (to 1.7 percent in August, from 2.0 percent in July).
Similarly, the Nashville rental market intensified along with rent prices. As of August 21, 2021, the average rent price was up 13% at $1,581 per month for an 890 square-foot unit apartment. 47% or 89,682 of the households are renter-occupied while 100,509 or 52% are owner-occupied. The most popular neighborhoods such as Hillsboro Village and Westend have one-bedroom apartments ranging from $1,817 per month. [Source].
Nashville ranked 10th on a recent SmartAsset list of cities with the best payoffs for owners of long-term rental properties. The study, which includes 120 U.S. cities with populations of at least 200,000, is ranked by composite scores that reflect home investment favorability, home affordability and rental opportunities. [Source].
The strongest factor in Nashville’s high score is its ranking in the home investment favorability score, which reflects price-to-rent ratio, percent change in median home values from 2015 and 2019 and estimated annual cash flow. [Source].
Property manager at Icon Realty in Fort Lauderdale reports that bidding wars among renters have become more frequent since the start of the pandemic when Florida was one of the few states that had limited COVID-19 restrictions, and many businesses remained open. [Source]
The rental market in Boston has also gotten much tighter, especially with college students needing places to live with the vacancy high point reaching 9% in September 2020, but today, nearly diminished to a pre-pandemic low of 1.72 percent, which was last seen in October 2019.
Fair Housing Law Protections for Renters
If you are a Nashville real estate agent who deals with renters it may be the time to ask your broker for guidance on fair housing laws procedures for multiple offer situations among renters.
“But individual landlords, they’re not subject to those requirements, nor does Florida have a state law,” Lipson said. “If a private landlord wants to accept an offer from a prospective tenant that says you want to pay $1,000 a month when we’re offering $900 a month, and they want to pay the year in full, there’s nothing against the law for the landlord to then accept that offer.”