Every year property management software company Buildium conducts a study of the residential rental market across the U.S. to get an idea of what trends are likely going to affect the industry in the coming year. This consists of collecting data from around 4,000 property managers, owners and renters as well as consulting independent research done by organizations like PwC, Zillow, Redfin, the NAR, and the Harvard Joint Center for Housing Studies and the ULI. They then compare this to the most current economic and demographic research to help them form their predictions. Today they released these predictions for 2019, and they had a few very interesting observations. As usual, I wanted to know a little more about what these finding might mean so I ask the CEO Chris Litster about his opinions about what this means for the property management industry.
One of the first findings that this years predictions included was that home prices seemed to be peaking and it is causing many people to turn to renting as a hedge. I asked Chris what indicators he had that home prices are peaking and he told me, “For the last several years, a severe shortage of affordable homes has combined with swiftly rising property values to create the most competitive real estate market in recent memory. In the second half of 2018, however, we’ve noticed plateauing home values, slowing home sales, and increased price cuts: all indications that there will be a gradual shift from a seller’s to a buyer’s market throughout 2019 and 2020. We don’t believe there’s cause for alarm—this is how our economy finds equilibrium when too many buyers have been priced out. As we described in this year’s predictions, we expect to see a slow and steady glide toward more reasonable home prices rather than a crash akin to a decade ago since we have a much more conservative homebuying and lending process in place now.”
While increased rentership from soaring home prices is pretty well understood by the industry the next insight that the Buildium team uncovered is that some of the more expensive urban areas are starting to see a slow down while suburbs and smaller cities are starting to pick up pace. This is at odds with the common theory that urbanization will keep driving growth in some of the more expensive cities. Chris explained, “In the aftermath of the Great Recession, major cities with strong economies were the first to recover, attracting a steady influx of new residents seeking well-paying jobs in the early 2010s. But as the cost of living in primary markets has risen to unsustainable levels in recent years, a growing number of residents—and businesses, for that matter—have had their eye on smaller cities and the suburbs. Over the next few years, population and employment growth are projected to rise fastest in middle-of-the-country boomtowns as young workers and families extend their searches for jobs and affordable housing to emerging markets. We expect to see primary markets like New York City, Chicago, and Los Angeles growing at a slower pace than thriving secondary markets like Phoenix, Las Vegas, and Dallas/Fort Worth in 2019.
Another important trend that Buildium’s predictions unearthed is that concierge-type services are no longer only the domain of luxury properties. Not every building can afford to have a dedicated doorman, but because of the changing consumer preferences and the rise of renting as a lifestyle concierge-like services are being demanded across the economic spectrum. Chris told me that, “In 2019, we expect to reach a tipping point in the industry: A majority of renters will have grown accustomed to a world where on-demand customer service is the norm. This means that their expectations will be higher than ever—and a personalized, highly responsive experience, powered by technology, will become increasingly key to keeping units full in the new year. For most residents, renting isn’t a lifestyle preference—it’s a necessity. As a result, concierge-like service that aims to anticipate renters’ needs is more than a frill—it’s a long-term strategy for property managers to retain residents of every demographic. In other words, property managers who don’t begin to adopt this mindset—regardless of the demographics they serve—will find themselves at a disadvantage to those who do.
This means that the job of property manager is quickly evolving into much more than leasing and maintenance. Interestingly, when I asked Chris what trends is he is watching he told me, “Specifically, in the property management sector, we’re keeping our eye on a developing trend: New property managers seem to be entering the industry at a slower pace than they’re retiring. What will this mean for the industry over the coming decade?”
All of these findings will change the value proposition for multi-family and single family rentals in the coming year(s). These trends and others will undoubtedly influence the evolution of the property management industry in 2019 and beyond. What’s clear, however, is that we’re seeing a steady shift to a people-first, tech-enabled form of property management; one that’s as focused on efficiency and profitability as it is on building relationships.