As Pensacola’s largest property management company, we wanted to give you an update on the Pensacola rental market and provide our predictions for Pensacola landlords for rents in 2024.
Pensacola rental rates have risen nearly 29% since the beginning of the pandemic in March 2020. We saw rental rates peak in March 2023 and have seen month-over-month rental declines since. According to Zillow, we’re seeing average rents of $1,715 in October 2023 and that has remained relatively unchanged since last October, however, if you look at October 2022, the average rental rate was $1,624 and in 2020 the rents were only $1,295. According to Apartment List, Pensacola rents saw a negative 1.5% rental growth in October year over year and a negative 7% year-over-year growth in October.
Days on the market have increased for 2023. We’re seeing an average day on the rental market of 33 days for the year to date in 2023, and with the slow fall we’re experiencing, we know that number will continue to increase. If you compare this to 2022’s average days on the market of 18 days, you can see the days on the market have nearly doubled in one year.
There are a lot of factors that will determine whether rents will continue to decline or remain stable over the next year. We think more renters will choose to rent in 2024 if interest rates remain higher in 2024 leaving a softer sales market. If the sales market improves, we will see less demand which is likely to put downward pressure on rents considering the huge amount of supply we’re seeing introduced into the market.
There are several reasons for our Pensacola rental market predictions for 2024 and for the decline in rent growth in 2023.
The main factor is the huge increase in supply. There’s been a huge increase in rental supply entering the market from:
- Failed Airbnbs that are being converted to the long-term rental market
- Build-to-rent single-family communities popping up all over Pace, Beulah, Milton, and Pensacola including new communities being built right now. These include townhomes and single-family homes.
- A huge increase in multi-family apartment communities. Pensacola has recently been ranked among the top 10 future new construction apartment developments in relation to supply. These new construction apartment complexes and single-family rental communities have amazing leasing incentives which include multiple month’s free rent, reduced deposits, no pet restrictions, and more. These communities also have fabulous amenities that are drawing renters in like community pools and gyms.
- The sales market is weak, causing homeowners to decide to rent their home rather than sell it. A lot of homeowners are strapped on cash and can’t wait months while their home sells, and are opting to keep their 3% mortgage rates and convert the home to a renter.
We do anticipate demand will stay strong in the Pensacola rental market. We have a great pool of renters and homeowners moving to the Pensacola area and strong renter demand from major employers like NAS Pensacola and Navy Federal Credit Headquarters, as well as several universities and a strong medical community. While we do see some people relocating as remote workers are called back to the office, we continue to see in-migration outpace outmigration, and the Pensacola area population is strong and predicted to continue to grow. Especially if the housing market stays soft, we will have strong renter demand in 2024.
Inflation has caught up to the average renter, and the average rent has outpaced local salaries. Many renters cannot afford the new inventory coming on the rental market. Demand in lower rent categories continues to be strong, but we are seeing more softening in certain homes like new construction homes in areas where they have recently built a lot of new construction properties and build-to-rent neighborhoods. We’re also seeing more luxury properties come on the market than typical and price softening in these categories.
Vacancy rates are up prior to pre-pandemic levels. ApartmentLIst estimates a 6% nationwide vacancy rate, and while we don’t have exact figures on the Pensacola area, we are seeing a huge increase in supply showing the highest number of rentals on the market dating back to 2017.
What can you do as a landlord to get your Pensacola property rented and positioned for success in 2024?
- You’ve got to have a great product! Between the new construction inventory and house flippers that have updated so many homes in the last few years, renters are demanding an updated property. A recent Zillow survey said 45% of renters surveyed said it was essential they had a newly built home or recently renovated one. In years past, we could get outdated homes rented at a good value, but that has changed. To attract a premium rent, you will need to ditch outdated finishes and update your home. This especially includes kitchen appliances that are used daily as that affects quality of life more than others.
- You need a comprehensive marketing plan to lease your homes. There are a lot of things we’re doing to get our properties rented. In addition to professional photography and comprehensive ads, you need to be on the websites that renters are looking like Zillow and Facebook. We also utilize Pensacola MLS to engage local agents with whom we pay a commission to help rent our houses.
- Price your property right. There is data that suggests that your rental should be priced higher than the market will bear. These come from historical data and active listings from landlords who are not aware of the sudden market shift. You will need to evaluate rental rates considering the month-over-month and year-over-year rent growth declines in the Pensacola area (and I suspect in most markets nationwide.) You can’t determine your current market rent on last year’s rental rates as we are seeing a small decline in properties that were rented last year at the peak of the market. We’re also seeing a ton of properties on the market with huge days on the market like 60, 90, 120, and 150 days on the market. This represents months of lost income and when you consider the lost income, it’s financially much more beneficial to price the property right.
We know that your property expenses have increased. From tax, maintenance, and huge increases in insurance premiums, we know the cost of homeownership has increased with inflation since the pandemic. While we hope rents remain stable, we are preparing for rental rate declines and you should be too. If you’re looking for a property management company in Pensacola, we’d love to talk to you further about how you can make the best decision for your property. Realty Masters leases more homes than any other management company in the Pensacola area and we are the Pensacola rental market experts. I’d love to talk to you more about your home!