Rent Price Updates and Why Landlords Are Optimistic

Dave:
More than 30% of renters now believe that the American dream does not involve home ownership. This is a statistic that real estate investors cannot ignore. So today we’re digging into what is going on in the rental market at large and with renter sentiment.
Hey investors, welcome to the BiggerPockets podcast. My name is Dave Meyer. It’s Friday, which means we have bigger news episode for you, this format. Every single week, we bring you experts and topics that help inform what is going on in the market and new cycles so you can make better investing decisions. And for today’s dose of solid investing advice, we are talking to Theos Giorgi, who is the CEO at Zumper. It’s an online rental marketplace. And in our conversation today, we’re going to talk about what is going on in the rental market and economy at large. Specifically we’ll talk about the fed activity, projected rate cuts, how that’s all going to play out. We’ll discuss how shelter costs impact inflation and some sort of interesting news there. We’ll also talk about overall supply and demand dynamics in the rental market, which classes of properties have too much supply and what that means for rents all across the rental spectrum. And make sure to stick to the end because we get into this great discussion about how this shift in American sentiment and this loss of belief that the American dream includes home ownership has changed and how it could potentially change the housing market really forever. Before we get into the episode, our bigger news episode today is brought to you by Rent app. This is a free and easy way to collect rent. And if you want to learn more, go to rent.app/landlord. Alright, let’s bring on Anth Anth, welcome to the podcast. Thanks for being here.

Anthemos:
Thanks for having me, Dave.

Dave:
I do want to spend some time digging into renter sentiment and how they’re feeling generally about the rental market. But first I’d like to just get a sense or an overview from you of just what is happening in the rental market? Are we seeing rent growth? Is it stagnant? I see conflicting reports in the media.

Anthemos:
I mean to zoom out to 30,000 foot first, what a few years it has been. We went from rapid accelerated growth during the pandemic, especially during that famous asset bubble of 20 21, 20 22, where Zumper, our marketplace tracked rents at 13% growth year on year through to today, which is kind of post fed moves, calming the market with interest rates. We’ve seen one bedroom rents negative year on year for the past several months. And so we are in a fascinating place in time right now where actually rent are flat year on year one. Bedroom rents are flat, two bedroom rents are mildly up year on year, but the month on month rents are actually to grow again. So it seems like we’re growing into busy season again, which might be the first normal season we’ve seen in several years, but it’s a fascinating point in time right now.

Dave:
Well, I agree, extremely interesting, and I have so many questions, but I just want to clarify something about the data you’re referencing. Is this exclusively residential, single family commercial? What are we talking about here?

Anthemos:
Yeah, so all the data I reference, although we cross-reference it against other platforms is Zumper. Our marketplace is asking rents on a given month. So we have about 1 million listings a month with their asking rents that we use to track this data. And this is across all of multifamily, small multifamily, single family SFR mom and pop landlords across the whole board. So this is a median rent that Zumper publishes every month that is the typical price for the typical door. There are some reports that just focus on multifamily. There are some that just focus on single family. Zumper tries to show you the median across the entire rental market.

Dave:
Does that mean that the trends that you just cited a couple of seconds ago about rent starting to grow month over month, is that true? You said one bedrooms, is that true of single families and of duplexes as well or is there any differentiation there? Yeah,

Anthemos:
We’ve seen a strength in single family that we haven’t seen in some multifamily. That trend going on is, and you’ve seen a lot of institutional investors come into single family too, is there has been this elevated resting heart rate that has occurred post covid of people moving into the suburbs or into secondary or tertiary markets away from downtown dense urban areas. And yet at the same time you had record multifamily construction come to market in those dense urban areas. So actually multifamily has been quite pressured in some of those regions. If you look at Jacksonville, Atlanta, many Texas markets, you’re seeing double digit vacancy rates in multifamily, which we have not seen in a very long time in those markets. Whereas in single family we’re not quite seeing that. And so I would say single family has held up, multifamily has held up in some markets, but in other markets where there’s been record supply to market has actually started to struggle.

Dave:
That is what I’ve largely seen is that the markets that are being mostly impacted and have the most negative downward pressure on prices are in the southeast, these overbuilt multifamily markets. But I’m always curious and ask anyone who comes on to talk about rents, whether that multifamily, like large multifamily, which on this show and commercial lending, we distinguish as anything that’s five units or larger, whether that spills into the residential space and it seems like maybe a little bit because rents are flat but not to the same degree. Is that a reasonable summary?

Anthemos:
And by residential you mean you talking about the for sale market or

Dave:
No, I just mean rent in either a single family home or in a duplex, triplex or quadplex.

Anthemos:
Yeah. The most interesting trade-off we’ve seen in the last year has actually been between classes of multifamily. You’ve seen a class A multifamily come down to prices that start to match class B and class B come down to prices that start to match class C. And so you’ve actually seen renters trade up on the class because basically every class has had to become more competitive by dropping prices, which has put a real pressure on some of the lower grade inventory. So it’s been less a trend we’ve seen between certain sizes of complex and more between the class of complex and the modernity of the amenities where a lot of class B has traded up to multifamily class A because it’s suddenly become affordable. Yeah,

Dave:
Okay. I’ve heard about that too. And I think it means that there’s going to be this cascading downward pressure on class B and then class C. And just to make sure everyone understands what we’re talking about is so much of the new rental supply that’s come online over the last few years is what is known as class A. There is no standard definition of what class A or class B is, but generally it’s a nice new property in a pretty good location. Class A is the easiest one to define. It’s a nice place, but so much of the supply that’s come on is class A, and that’s due to all sorts of macroeconomic factors, but it’s basically most profitable for developers to build class A properties. And what Anth is talking about here is that because there’s so much new supply here, that’s also where there’s a lot of vacancy. And what happens when operators in a nice building have vacancy, well, they lower their prices and then tenants who would normally rent a class B or a class C property, they see the class A property and say, Hey, this is cheaper. I’m going to go live there. And so then that sort of passes the vacancy problem down to class B and then down to class C. So that is sort of this interesting dynamic that’s going on.

Anthemos:
Yeah. Dave, if you think about the timing, just to add one point to what you said, the insanity of the timing that a lot of those class A decisions were made pre pandemic or in the early days of the pandemic when the economy was on fire, the Fed had rates of record lows, and then that inventory with the lag of construction and permitting has come to market at a very time of highest interest rates in a generation, very unclear economic outlook, and they’re trying to market these class A properties. I’ve never, in the 10 plus years I’ve run zumper, seen so many concessions right now being offered to incentivize people to still take the leap. So a really once in a generation effect going on right now in the rental market.

Dave:
Well now I have several more questions because that just brought up several other things I want to ask you. Now, you mentioned concessions. First of all, concessions just for everyone who knows, this might be something like first month of rent free or a free parking spot or just something that is, other than lowering the actual asking price of rent. And this from an analyst like my perspective is very annoying because it really alters the dataset because you say, Hey, rent is flat, but is it really flat? If the landlord’s giving away a free month of rent, that’s actually effectively lowering the rent by about eight and a third percent, and that is obviously lowering rent. So do you think that’s altering the dataset here, Anth? Is rent actually weaker than the data appears?

Anthemos:
That’s a great observation. That is the biggest asterisk on our data when we publish it to say these are published asking rans. The caveat is there are move-in specials, whether it’s six weeks free, sometimes two plus months free or sometimes like you mentioned, a parking spot saying that the data is also apples to apples. So the data we’re comparing it to is also data sets a year ago, two years ago that had the same asterisk of this excludes rent specials. So the data’s internally consistent. But to straight up answer your question of are rents probably in real terms down by more than they look? Yes. And so when we’re saying one bedroom rents were down for the last few months and they’ve only just come back to equal year on year, yeah, they’ve actually been down a little more than published. And in some markets, and especially if you look at California that has had some much slower rent recoveries, that’s quite the statement when it’s still not including major rent concessions. The story may be worse than investors fit.

Dave:
So how then, can I square something you said earlier, which is that rents are starting to climb now month over month? How does that make sense?

Anthemos:
Yeah, so we are talking in spring, I mean June, 2024, I think there’s two things that are driving climbing rents. And we just showed on zumper, both one and two bedroom rents climbed 1.2% month a month in May. That was the first time in 20 months of data, both one and two bedroom rents grew by over 1% month on month. So we are definitely seeing a shift in sentiment here of growth. Two things I think are driving it, Dave. The first one is seasonality into summer. 60 to 70% of moves are happening typically in late spring and summer. And we’re climbing into college migration season, job season, people moving to new cities or trading within cities. So I think one is a return to more seasonal patterns. The second one is more of a macroeconomic shift, which is most consumers feel more certain. Now, I don’t think they necessarily feel more optimistic, but I think we know the Fed is unlikely to raise interest rates again.
Now they’re going to cut interest rates by far less than people hoped for in 2024. But a lot of consumer behavior we noticed on renter’s side is they kind of want certainty before they make an economic decision. I think a year ago there was far less certainty about what the Fed were and weren’t going to do. And even though this year the fed have not cut yet and they’re not imminently seemingly about to cut, I think there’s more certainty that there aren’t massive rate cuts ahead. And that produces consumer confidence, which leads to household new household formation again, which is something we haven’t seen for a couple of years. And when new household formation happens, renters begin to move out of roommate situations, they don’t go live with their parents and also people start to buy homes again, it’s actually on both sides of the real estate market. And so I think if you take those two trends, they are probably the best explanation for why you’re starting to see the rental market heat up again as we enter summer.

Dave:
That’s such an important point. And I think it’s true not just of renters, but just every economic decision that optimism and certainty are totally different psychological elements of decision making. And of course we all want to be optimistic and wish that there was more positive certainty in the market, but certainty in itself does bring some stability both to the rental market and to the housing market because at least people have a reasonable expectation of what things are going to be like for 12 months from now. Whereas I don’t think you could really say that in 2022 or 2023, it was pretty hard to forecast what was going to happen. And so although it’s probably not the rosiest outlook for the next 12 months, at least you have a sense of what is likely coming and people then can make sound decisions about that. Alright, so Anth has laid out what’s going on in the rental market at large, but how are average Americans and average investors impacted by these conditions and what does this mean for first time home buyers? We’ll get into those questions right after the break. Welcome back to bigger news. I’m here with Anth Gidi and we are talking about rental trends and attitudes about rent in the us. Let’s jump back into it. So I’m curious if you think Anth, that this trend of modestly increasing rent will be felt by the average landlord, is this a big enough trend that it’s going to change someone’s p and l, their performance on a property? Or are we just starting or is this too early to tell?

Anthemos:
Yeah, the non sensational argument is it’s probably too early to tell. I think the only asset class that still has a lot of recovery is large multifamily in these markets that have faced oversupply. I mean there are markets in the Sunbelt, Texas, Arizona areas in Florida that have had like 20 plus percent of their housing stock come to market this year or last year. And that is a seismic shift to supply and how much new inventory is keeping rent suppressed or in some markets very negative. I’ve been on the phone with customers in Jacksonville and Atlanta last week who were facing 12 to 14% vacancy rates. That’s a very hard thing to deal with when you have inventory coming to market for the average investor. I would say for the mom and pop, and I am a mom and pop investor, my wife and I own a couple of units, I would say nothing seismic forecast into summer.
I think we’re now just starting to return to the equilibrium rent growth, equilibrium occupancy rates. And I think maybe the unsexy but important story is this may be the first summer that looks like what we were used to before the pandemic. We are starting to return to equilibrium across both the vacancy rate and the median rent growth rate. And I think that many landlords, including myself, will actually cheer the predictability that the p and l will become. And so back to your point, Dave, you nailed it. There’s kind of confidence and then there’s actual certainty. We’re kind of in the feeling a bit more confident that we’re returning to the certainty, but we’re still in transition. But I want to say that this is probably going to be the first summer since the pandemic that we are all a bit more certain as small landlords. And I think most people would share that. And

Dave:
For reference, what would normal occupancy rates and normal rent growth be?

Anthemos:
Yeah, great question. I mean, so I’ll use real page. The P-M-C-P-M-S solution who tracks occupancy and vacancy rates, obviously they’re the inverse of each other. The historic median in the US is occupancy oscillates around somewhere between 94 to 96%. Historically there’s your collar and there’s a standard deviation in between that. So vacancy rates is a proxy of that are somewhere between four to 6%. And right now we’re around 6%, so we’re on the high end of the median, but within a standard deviation to link it to what we’ve been discussing, Dave, in the pandemic occupancy rates went to 98% up from 95 up to 98%. It’s only three percentage points of a change, but that was a three stand deviation switch, meaning it’s an impossibly unlikely outcome that vacancy rates went to 2% and occupancy went to 98%. So now we’ve come down from that back to the trailing 20, 30 year average. It just doesn’t feel like it for many landlords because we were all lived through markets where we could rent a unit in a month and there were seemingly just units flying off the shelves in most major markets in 2021 and 2022, it’s no longer quite that good. But what statistically we are now in is something that is much more like the 10, 20, 30 year average, and this is probably more the market we should expect going forward.

Dave:
I certainly hope so. Yeah, we talk about this on the show a lot that we think that predictability is more important and stability, and I know people love to see these huge upswings in property values, but those things are blips, they’re unsustainable and they raise often more questions than they answer. And for me, at least as a long-term investor, I’d rather see slow, steady, predictable conditions than this sort of volatile situation where yeah, you get really big spikes, but also that comes with uncertainty and the potential for retractions as

Anthemos:
Well. Totally. And to your point, actually forgot to answer the second part of your question. I gave you the occupancy side. So really important question is rent growth, you asked that as the second part. What is typical rent growth? Before the pandemic, it was always a slightly above inflation. So if inflation was at like two point a half percent, some people track rent growth a point above that, maybe three, three and a half percent in most markets in the pandemic that swapped. So you had a record inflation rate in the high single digits. I think 9% was the highest CPI print or close to that, but rent actually peaked at a median of 13%. So you kind of had rent outpace inflation. It wasn’t just that one point on top. It really accelerated. And as you know, shelter is an enormous piece of the CPI calculation that you read about every month. And so it really pulled CPI up with it. I suspect now Dave, we will go back over time to rent still being slightly ahead of CPI, but not 4% ahead of CPI. That would be a very broken market.

Dave:
Well, I wanted to go down this rabbit hole of talking about inflation and rent, but I was going to do it later, but you just opened the door. So let’s just talk about this. You mentioned that the CPI, the consumer price index, which is one of a few ways that the government measures inflation in the United States, it’s probably the one you hear about most often, at least in the media. The consumer price index it’s made up of, they call them different baskets of goods, it’s things like food or energy and shelter, as Anth was just saying, is one of the biggest components of that top line number that you hear. So when you hear that the Fed wants to get inflation down to 2%, that’s not one thing. It’s an average of different prices in the economy and how much each one of those buckets is weighted within the overall CPI changes over time based on how fast they’re growing and how important they are. And as you mentioned, shelter, which is made up of rent and something owner’s equivalent rent, which is sort of like this made up rent for homeowners. It makes up what it’s like over 40% of the CPI now.

Anthemos:
Yeah, correct. It’s always been over a third. And to your point, there have been points where it’s over 40%. And so basically what we’re discussing now is really what a macro economist needs to understand more than any other constituent in the CPI because it’s the biggest driver.

Dave:
And so is it fair to say that at this point in the inflation cycle it peaked at I think 9.1%? I think the most recent print was like 3.4, 3.5. And now is it fair to say that rent and shelter is the primary driver of higher than desired inflation right now?

Anthemos:
Yeah, so there’s a couple of fascinating dynamics, the most important of which is the CPI does. Its absolute best to understand rents, but there’s a pretty inbuilt lag on the impact. First of all, the survey is I believe done every six months. So they’re refreshing prices every six months. But as you know, Dave and your listeners know stuff changes a lot faster than that. And secondly, it’s a estimate of all renters and what the average renter of paying, I believe that it’s only a quite small minority is the new leases to market. So if you could take both of those factors together, there’s a pretty big time lag on the CPI. So for example, it took a while for the CPI during the pandemic to reflect the fact that rents were growing at double digit percent year on year. We all knew that in the residential rental industry.
But the CPI showed that six to 12 months later and then exactly the inverse effect. Now Dave, where we’ve seen on Zumper rents cool in a very frosty manner in the last six to 12 months that has really only started to show up in the CPI in the last six months. So I would say there will be a downward pressure from rents that were leases signed in the last six months for the next six months of the CPI. And you’re going to see that lag effect. The final weird part of the story is Dave, well now we’re seeing rents start to warm up again. And so then once again you’re saying, well crap, that’s going to show up in the CPI in six to 12 months. So I guess the kind of exact summary is what we all see on the landlord side today is the first view of what’s going to show up in that CPI calculation 6, 12, 18 months forward. And we are seeing what’s going to happen to consumer sentiment to consumer inflation prints pretty much before anyone else does because of this lag effect that Lisa signed. Now take a long time to show up in the CPI, if that makes sense.

Dave:
It does. And if anyone listening is struggling to understand this concept, don’t worry. This is kind of confusing. Basically there’s just different ways that you can measure rent data. The way that the Fed doesn’t isn’t necessarily wrong. It’s just pretty slow. And so when you have a data set like zumper looking at asking prices in real time because it’s a listings platform, there’s going to be data that comes in sooner than the way the Fed corrects it. And so when it’s in effect, if you look at private rent data sources, you can sort of understand the direction of inflation and the direction of rent costs as measured by the Fed into the future. What Anth is saying here is that although it took a while for rent inflation to start to come down almost a year after private data started showing that that’s happening now, but now we’re starting to see Red start to tick up. So that could spell trouble for the top line inflation number and the Fed’s effort to control inflation and potentially even to raise rates. But at the same time, the Fed knows this, right? They know their data is slow. So do you think this is going to impact their decision making or have they already factored this in to the most recent press conferences which came? I think about mid-June.

Anthemos:
So yeah, one interesting fact, and Dave you hinted at this a few minutes ago, but I want to say the owner’s equivalent, some of the metrics are so well intended in the CPI, but they’re kind of wild where one of the questions is they ask homeowners what the equivalent rent would be if they rented out their unit. And that really is just a guess. And so it’s kind of a wild piece of data to have in A CPI calculation because it actually drives behavior, but it’s a theoretical number. So first of all, this is a very wonky calculation and no one fully understands it, including economists because it really, there’s so many variants within it. Back to your question, do the Fed understand this? So the first answer has to be yes. I mean these are PhD economists, they’re far smarter than me and merely MBA who’s trying to grapple with the data.
And you would hope that they understand this, they understand the lack. The only part of me that says perhaps not a hundred percent, they are not rental market experts. They are overall inflation experts, is what happened in 2020 and 2021 and 2022. We were told as Americans that inflation was transitory. It wasn’t here to stay. It was driven by fuel prices and gas prices. Doing my job as CEO of Zumper and seeing the rental inflation we were seeing and knowing that I really probably didn’t know this fact before the pandemic, but I definitely do now that a housing constituent of the CPI is the largest single thing, it could be over 40% if you knew those things. You knew this was coming in 21 and 22, but the Fed were telling everyone that it was transitory, whereas this is the least transitory thing in the world shelter. This is where we all live and reside. And so 1% of me, Dave, thinks maybe underestimated the impact that this single biggest constituent would have. And I dunno how to square that with the first one that they are PhD economists who surely understood the lag effect that rent would have. And if they didn’t understand it, then all I will say is they certainly understand it. Now

Dave:
That was a very diplomatic answer of you and no, I agree. I mean, listen, has the Fed made mistakes? Yes, definitely. They were dead wrong about a lot of stuff. I think that they were probably trying their best and it was a genuine miscalculation, but hopefully they’ve learned their lesson now and are factoring this into their decision making because this has become abundantly clear. And if you operate in the very specific world that Anth and I often operate in, this is well known at this point. And so I have to assume that they’re factoring this in and isn’t going to make a huge difference in their decision-making because it’s probably already being factored in. Alright, thank you for indulging that tangent there about inflation because I do think it’s very important that people understand the role that rent and housing plays in the overall inflation numbers.
We have to take one more quick break, but when we come back we’ll hear from Anth about whether or not the American dream of home ownership is truly dead. And we’ll break down how investors can use all these trends and insights to make strategic choices. Now stick with us. Welcome back investors. Let’s jump back into my conversation with Anth Giorgi. I do want to talk a little bit just getting back to demand and renter dynamics. I’ve heard quite a lot that more people intend to rent for longer, and that probably just comes down to basic dollars and cents because it is cheaper in most markets to rent. Do you have any data or anything to back up this idea that there might be sustained increases in rental demand?

Anthemos:
Yeah, I mean you’ve all heard about the kind of anecdotal things of millennials and Gen Z wanting access but not wanting to own. So the classic example is the average millennial doesn’t want to buy a house. They want access to lots of rental homes, vacation homes, rental homes. They don’t want to buy a car, they want access to transportation. Uber, they don’t want to buy music, they want access to music, Spotify. So the general wisdom has been that’s going to continue into the real estate market. People are never going to buy homes and they’re going to rent. That’s not quite what we see. And I run a rental marketplace, we would be well served by saying everyone’s going to move to rentals, but that just isn’t the case. However, there are a couple of data points that are important. So the first one is 30% of people said that the American dream no longer includes home ownership.
That was steady with the year before, but I think as who became American, I’ve lived in this country for almost 15 years. When I first moved here, those two things were inexorable. The American dream was buying three homes, having a family with 2.4 kids. And I think for 30% of renters to now say the American dream doesn’t involve home ownership is really quite fascinating. The other data point which relates to this but is on a slight tangent, is in the same survey, 38% of renters said they will never buy a home. And I think you hear two things there. There are people who say they’ll never buy a home because they’re part of the first group who say, yeah, I want to live the American dream, but I don’t need to buy a home to live the American dream. But then there’s definitely a subset of people included in that who are like, I’ll never buy a home.
I can never afford to buy a home. And I think at the time where interest rates and mortgages are what mortgages are now, what seven plus percent for a first time buyer at the time of recording, there are a lot of people in that 38% who may want to buy a home but are just realistic that we may be in a higher interest rate environment for a very long time and definitely higher than we were all used to could have for the last decade. And I think there’s a lot of renters and Americans now who think that home ownership is out of reach and they’re going to go after a different dream. So I’d say the home ownership dream is not dead. There are not people, it’s not completely dead. Not all millennials and Gen Zs have given it up, however, between people who actually have given it up and people who are very pessimistic about the affordability of a home, yeah, there’s a pretty seismic shift going on towards the rental market. And that was the bet that a lot of these big developers made during the pandemic on driving so much multifamily rental inventory into these dense urban neighborhoods because they were going after those people.

Dave:
The change in sentiment about the American dream is fascinating and could have huge implications on this industry. I’m curious to see if it’s just sort of a temporary blip, is this really truly a change in preferences and values or is this a reaction to extremely low home affordability and probably a reflection of some just frustration and pessimism on the behalf of homeowners, because I could definitely see that happening. But one thing that came to mind Anth while you were talking is as a landlord, someone who is financially stable but just chooses to rent and rent for a long time, sounds like it could be a great tenant. Is there anything that landlords or property owners are doing to try and attract and retain this particular demographic of tenant?

Anthemos:
Yeah, a lot. From what I’ve seen, I think there’s a fantastic question and there’s various slants on it. The one I’ve seen most recently, this is both through Zumper and also just anecdotally, through friends who’ve become income landlords who maybe invested their first ever dollars that they made into an income property that they plan to leave to their kids was around single family homes. I think a lot of people have tried to capture the demand of first time buyers where now first time buyers. I think that in 2022, only 26% of home purchases were from first time buyers, which was the lowest ever, I believe, on record. So I’ve definitely seen a group of landlords, mom and pop landlords who’ve gone after that demand of people who couldn’t afford or decided not to buy their first time home, typically in secondary or tertiary markets in suburban neighborhoods have now gone after that demand by basically giving them a no frills rental, where basically the buyers who were to be buyers who are now renters, where they get through the rental is effectively potentially the same house that they would’ve bought.
But they get now to work with a landlord who will just take some of the costs, the HOA fees, any of the other things off their mind and just bake it into the rent. And I think a lot of millennials in that trend of we want access, but not the responsibility of ownership, kind of like that. A lot of the insurance, the real estate tax, the HOA fees, if they apply, are just baked into this one number. They pay monthly and then in theory they don’t have to worry about it. I’ve seen that start to happen on single family rentals. I think that’s partly why you’ve seen major institutional investors come into single family rentals because people on the landlord side are now starting to meet the demand of first time buyers who are no longer first time buyers, but want the same kind of assets and inventory in the rental market. And so have definitely seen single family rentals as a really fascinating investment case. The only downside is, is now becoming competitive because a lot of people are seeing the same demographic shift.

Dave:
It makes me wonder if we’re going to start to see changes or big shifts in lease terms because to me, one of the major challenges with being a long-term renter is the uncertainty. I guess this is the theme of the episode, we’re just talking about uncertainty a lot today, but is the idea that you can move into this place, set it up, spend a lot of time, make it super nice, and then your landlord could not renew your lease or they could raise rent to an unsustainable level. And that probably drives, I think a lot of the desire to own a home is just being able to sort of be certain about your future lock in that fixed debt. So you know what your payments are going to be roughly minus insurance and taxes. But it makes me wonder if certain property owners and landlords are going to switch their case to try and attract these types of people to maybe either offer longer leases or leases tied to inflation or CPI. I’m just sort of riffing here. I don’t know if you have any thoughts or data on that Anth, but curious your opinion.

Anthemos:
Yeah, so yes to everything you’ve said At peak 22, we also said a lot of leases that you could pay in crypto that actually happened

Dave:
And now not

Anthemos:
So much anymore. You know what, there are still in the third or fourth wave of crypto, there’s still token based leases, but definitely hearing less about it than I did in 22. The actual additional one we’re seeing a lot more of both across institutional landlords and investment grade landlords is actually shorter leases. So flexible leases. So offering people the ability to sign a more flexible lease with some inbuilt guarantees, but actually saying to renters, you don’t have to commit to me for 12 or 18 months. Let’s do a rolling lease and the landlord will try and incentivize you to stay, but I won’t ask you to commit to 12 months. And you kind of saw that in the pandemic with the digital nomads living everywhere. I think that’s subsided a bit. There’s still people doing that, but I think we’ve kind of returned into more long-term leasing environment.
But there are elements of the flexibility of a flexible lease that have stayed. And some SFR landlords offer it. And I’ve even seen some SFR landlords try and build a network in their community where say they have, I know 20 single family homes in Jacksonville spotted around different neighborhoods that actually try and lock in almost like a loyalty program that you can bounce around. But you can actually, if you move to one of my other ones, I’ll incentivize you to switch in if it’s vacant. And you’ve seen tech startups doing that, and now I’ve actually seen some single family rental landlords try and do that as well. I’d say it’s still rare. I think the median and the mode here, the most classic lease is still a 12 month lease with a kind of an optional renewal typically. Yeah, negotiated maybe inflation plus, but still some creativity in the market that has lessons from the pandemic applied forward to the market today.

Dave:
Super interesting. And it really just makes me wonder what’s going to happen. So we’ll have to follow up with you and just track this on the show because there are huge shifts here. If you’re talking about changes in sentiments and values in addition to this just rapid reversal of home affordability, it does seem like a lot of times these challenges spark creativity in an industry and it sounds like that this industry might be ripe for some of that creativity and new thinking. So we’ll of course bring you any new developments of that on this show. And before we get out of here, is there anything else, our audience, mostly of small time investors, aspiring investors, real estate agents should know from your research at zumper?

Anthemos:
I mean, first of all, keep doing your thing. My wife and I have the own two units that we rent out, and it is a journey. It has been a wild ride. I think the best thing, and this is my world, so I’m biased in saying this, but is try and keep an eye on real time data that is your best advantage, both on occupancy rates split by market, which you can find on RealPage. They’re my favorite kind of free source for this. If you go a real pages blog, they have a lot of stuff split by market and then on realtime rent. So if you go to a website like zumper or one of our competitors, like Zillow as well, go to zupas, like City Page, Atlanta, Jacksonville, or go to our neighborhood page, go to the marina in San Francisco or Pacific Heights in San Francisco.
We update graphs every single day, cut by studio one, bed two bed, three bed, four bed on rent prices, real time trends of what’s happening in these markets. And just like I think our industry was ahead of the Fed on the changes that were coming. I honestly think being data-driven in 2024 and seeing rent trends before competitors see them, other mom and pop landlords see them, and definitely before the institutions see them, just trying to be as informed as the big institutions is a real advantage. And the final thing I’ll say on this is there were trends in Covid that if you picked up on early, you could have made a lot of money or saved a lot of money. So San Francisco, for example, where Zumper was founded, although now we’re distributed across the us, you could see early in San Francisco in Covid in our data that there was a real problem that people were just leaving the state of California, were leaving San Francisco.
And it was evident in the rent data very, very early. And if you picked up on it, you could have been able to divest the property there or you could have been able to renegotiate terms and et cetera. Data is absolutely your unique alpha, your advantage, go after it, look at it weekly, and almost everything I’m talking about is free real pages, blog zupas, blog, Zumper City pages, Zillow City pages. All of this is free and you can cut an edge because most people are not looking at it this obsessively and this is your advantage. So that would be my single biggest point of advice is become a data expert in your industry and in your market. And I’ll bet that the majority of your competitors aren’t doing it.

Dave:
That’s great advice. And you basically just gave an infomercial for this segment, this bigger news show that we do here on BiggerPockets every Friday where we try and give you that data. And Anthony, you’ve been a very important and helpful part of that. So thank you so much for coming on today, sharing this information and your research with us. For anyone who wants to learn more about Anth or Zumper their team, what they’re up to, we’ll put links in the show notes below. Thanks again.