It’s no secret that our real estate market has been steadily increasing in price and demand for the past few years. In that time, our rental market has also skyrocketed to what it is today.
MHP Augusta has a substantial rental portfolio that we manage, so I have watched this change at a hands-on level. I’d like to give my input on the situation, and why I think there has been such a drastic change in the market.
There are a few things that have happened to get us to where we are today.
Supply and Demand
The laws of supply and demand are simple: If the inventory is greater than the demand, prices will drop. If the inventory is less than demand (where we have been for a few years), then prices will rise. The CSRA has had a high influx of high-wage earners moving here for work. These places include the two nuclear sites, all of the hospitals, and Fort Gordon. This fluctuation of people has increased the demand in our market.
Covid-19 has affected basically everything – the real estate market is no exception. First, it has greatly increased the price of maintenance on homes, which increases the owner’s carrying costs. Second, covid-19 allowed people living in big cities to work from home.
Since the CSRA is such a great place to live, some of those people have been moving here since the cost of living is under the national average. This kept our demand high during covid. Now that covid restrictions are being reverted, and it seems covid is almost behind us, we are seeing a second influx into our local areas.
Interest rates rise to battle the demand for borrowers and inflation. Higher rates will discourage borrowers and slow down borrower demand (theoretically). It’s surprising how much interest rates affect a monthly mortgage payment. Unfortunately, it also affects investors who have recently purchased a home, which will in turn add to the carrying costs of the owner.
Interest rates also have a less direct way of affecting the rental market in particular. When borrowers are discouraged from buying … well, they have to live somewhere, which means they will be added to the pool of potential tenants, thus increasing the demand for a home to rent.
Property taxes aren’t normally associated with rental properties, but they are in fact directly associated with rental prices. These taxes are taken and a set percentage, and when the value of a property goes up, so too does the property tax. This will also increase the owner’s carrying costs.