Many real estate experts are calling for rent prices to rise
While the real estate markets throughout the country are constantly shifting, many felt that heading into 2023, we’d see a calmer market overall than we had from 2020-2022. But rent prices, for the long-term outlook, are not looking promising as we move into 2023. In August of this year, the median rent price in the most significant 50 US cities fell by about $10, according to Realtor.com. That was the first time we saw a dip in the US median price since November 2021.
But, unfortunately, one month’s worth of decline in that rent price doesn’t necessarily start a long-term downward trend. Rental demand will remain strong due to rising mortgage rates and homeownership costs, which will stop many people from being able to enter the buyer’s market in the new year. This forces many would-be homebuyers to remain in the rental market, signing leases through 2023 and beyond, exacerbating an already high-demanded rental market.
Expect above-average rent price increases for the first half of 2023
Based on data from the federal government’s consumer price index, the Federal Reserve Bank of Dallas predicts that rental prices will increase from 5.8% to 8.4% between June 2022 and May 2023.
According to Thomas LaSalvia, a director of financial analysis at Moody’s Analytics, annualized rent increases were from 4% to 5% during the Covid pandemic.
“There’s an anticipation that interest rates still have to rise in the next six months for the Fed to get inflation back into its comfort zone,” LaSalvia says. “And with that, mortgage rates will stay relatively high.”
Moody’s expects prices to grow more slowly in the second half of 2023 as long as mortgage rates stay low.
“There’s also an expectation that the Fed is going to pivot [away from continued interest hikes] after inflation starts to come down, which would then take a little pressure off the mortgage market,” LaSalvia says. This, in turn, should provide some price relief for renters, he says.
What Rising Rent Prices Mean for Relocation Policies
There’s no question that living costs are closely related to home renting and buying prices. This is why rent prices, rising or declining, can have an impact on an employee accepting a relocation assignment. While many might think that the only way to get an employee to move for their new job is to throw more money their way, there are relocation policies that can be set up to help offset the cost of living and make moving expenses more manageable.
First off, offering corporate housing options can help persuade an employee. Corporate housing is short-term housing from anywhere from 30 to 90 days. The primary purpose of providing employees with this benefit is to give them time to scout out neighbors or apartment complexes they might want to move into permanently in their new destination. This way, the employee doesn’t rush into signing a lease that they will not be happy with long-term.
Many employers also see success when they work with a relocation service provider who can guide them in lease management options. The most straightforward example would be for the employer to provide compensation for an employee breaking their current lease. Often, to break a lease on a rental property, it can cost too much to make it worth it. But there are relocation policies where lease break coverage can be included.
Let GMS Help with a Cost of Living Analysis
Global Mobility Solutions (GMS) has been the industry leader in relocation for over 30 years. We specialize in helping companies get their employees from point A to point B. Whether your employees need to sell and buy a home or break their lease and sign a new one, we can help you by setting up relocation policies that will make a smooth transition for you and your employee.
On top of rental and home-buying assistance, we also have great corporate housing providers who can set up your company with some short-term housing options.
And lastly, GMS’ expert team would be more than happy to provide you with some cost of living analysis for some of the major markets, not only in the US but international destinations as well. We assist with these analyses to make it easier for your employee to want to accept the relocation assignment.
At GMS, we understand how hard it can be to get the right person in the right seat, which is why we are here to help in any way we can. Reach out today to schedule a free consultation, where one of our relocation experts will review your relocation policies to see where improvements and cost-saving changes can be made.
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