Will Renters Win in the Softening Housing Market?

February 28, 2023

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What's important to know:

After years of skyrocketing rental prices, the rental market could shift in favor of tenants.
More than 971,000 apartment units were under construction across the US at the end of 2022, and approximately 575,000 multifamily units are scheduled to be completed this year.
According to housing economists, if apartment demand doesn't pick up, or if the US economy slides into a recession, the rent that landlords ask for new leases could fall nationwide on an annual basis for the first time since the global financial crisis.
According to RealPage, a real estate software company, 2023 will see landlords competing fiercely for tenants, resulting in concessions like months of free rent, free parking, and gift cards.

Housing Correction Expected to Continue in Major US Cities

Goldman Sachs analysts predict major declines in home prices in the US cities of Austin, San Francisco, Phoenix, and Seattle due to the surge of available homes surpassing demand caused by the COVID-19 pandemic.
Factors contributing to the price declines include very poor levels of affordability, pandemic-related distortions, and a high concentration of employment in the technology industry.
The US housing market has struggled over the last year due to a surge in mortgage rates and an increase in asking prices to entice demand.
Although the decline in home sales is nearing a bottom, the price plunge will continue for months, with home prices projected to fall by as much as 20% by the end of this year, according to Pantheon Macroeconomics.
The Goldman Sachs analysts noted that even if every single home under construction was completed and listed on the market immediately, the months’ supply of homes would still be below historic averages.

A family in the US fell victim to a rental scam after paying a deposit and moving into a rental property they had found on Facebook Marketplace, only to find out hours later that the property was not actually available to rent.
The scammer had taken the photos and details of the property from a legitimate ad and created a fake listing, charging half the price.
This situation is becoming increasingly common as the cost of renting is driving people to search for more affordable homes.
Redfin's Daryl Fairweather says it's never been easier for scammers to make a fake listing. "You can pull photos from other listings; you can digitally alter them," he said.

Fifth Wall raised $1.5 billion in new funds in 2022, including the $866 million Real Estate Tech Fund III, €140 million European Fund and $500 million Climate Fund.
Fifth Wall has raised $2.9 billion since 2016, making it the third-largest capital raising venture firm globally.
The Los Angeles-based company is the largest and most active investor in proptech and has recently expanded its investments to include climate tech.
Fifth Wall's success is attributed to early identification of the intersection between real estate and technology, allowing investments in category-leading businesses in what is now called proptech.

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