Economic cycles can cause fluctuations in the number and type of prospective renters in the market. According to the 2017 State of the Nation’s Housing Report, more families are renting today due to “high rates of foreclosure-induced exits from homeownership in combination with lower rates of homebuying since the Great Recession.”
However, what seems to baffle even the sharpest multifamily marketers is how to predict economic cycles and then adapt the budget and marketing strategy accordingly. To prevent you from getting stumped next quarter and beyond, here is a quick guide that outlines economic trend predictors and provides resources for monitoring them.
1. Gross Domestic Product (GDP)
The GDP is a solid indicator of the economy’s health because it measures a country’s economic productivity and adjusts it for inflation. It tracks production costs and output, income, taxes (property and sales), and consumer spending.
If the GDP is trending low, for example, consumer behavior will tend to be more conservative. This could mean that fewer prospective customers will want to relocate or upgrade to a new property. If a downward trend is about to occur (or is occurring), reassess your budget and weigh your staffing needs. When fewer prospective renters are calling or visiting your communities, you may be able to cut costs by using contract or part-time employees instead of relying on full-time staff.
Monitor the GDP each quarter by following the U.S. Department of Commerce’s Bureau of Economic Analysis. Bonus tip: You can also search GDP by state and metropolitan areas.
2. Interest Rates
For many people, mortgage and home equity rates heavily influence the decision to rent versus buy. Thus, it’s critical to be aware of this market predictor.
When interest rates are high, people are more inclined to rent rather than buy. Capitalize on this in your advertising efforts by showing would-be homebuyers that a rental can feel just like home, too.
Pay attention to Bloomberg’s Consumer Interest Rates and Marketwatch for insight.
Population change is an important predictor of consumer behavior and buying trends. You’ll want to understand the differences between groups like baby boomers, who are approaching retirement age, and millennials, who are becoming first-time renters.
Demographic trends can inform your marketing strategy. For example, if you want to target millennials, you may choose to focus your marketing spend on social media platforms like Instagram and Snapchat instead of print-based advertising.
4. Employment Data
It’s pretty simple: If unemployment is high, people may not be able to afford to pay rent. If the data indicates that vacancies have increased due to unemployment, consider lowering the rent at your budget and mid-range properties and subsidizing long-term rental agreements with short-term offerings.
Each quarter, review the U.S. Department of Labor’s Bureau of Labor Statistics.You can also check out the interactive maps of Homeownership Affordability and Cost Burdens from the Joint Center for Housing Studies of Harvard University.
By staying on top of the economic trends, savvy multifamily marketers can adjust their strategies over both the short and long term. Over time, you may be able to make informed predictions about what’s coming over the next few months or years. In this way, you can adjust your strategy to manage a downturn or to take advantage of prime economic conditions as they arise.