For MLSs, rentals make good business sense
As for-sale listings have declined, more MLSs are integrating rental tools that can help members sustain their business in a slower market.
Key points:
- The share of renter households is rising, presenting an opportunity for agents looking to tap into the rentals side of the market.
- Several large MLSs have partnered with rental services providers like RentSpree and RentBase, giving members more tools to manage rental listings.
- Building relationships with renters can provide both an additional revenue stream and a larger client base.
MLSs have traditionally focused on the for-sale market. But as high interest rates and low inventory have put a damper on listings, the rental sector is suddenly looking like a good business opportunity.
After all, pending home sales plummeted in August. Sky-high mortgage rates are scaring off buyers. Meanwhile, the share of renter-occupied households is on the rise. In response to declining home sales last month, Realtor.com Chief Economist Danielle Hale noted that "rising homebuying costs and falling rents have tipped the monthly rent vs. buy tradeoff in favor of renting in the overwhelming majority of the 50 largest metropolitan areas."
So where does that leave agents who rely on a steady stream of buyers and sellers?
"Inventory is down and home prices are up, so agents are spending more time looking at different ways to grow their business and build relationships," NorthstarMLS COO Michael Bisping told Real Estate News. "And rentals are an important part of the real estate lexicon."
MLSs bolstering rental opportunities for members
NorthstarMLS, which serves more than 22,000 real estate professionals in Minnesota and Western Wisconsin, first moved into the rental space in 2010. But it was never a big part of their business, and the MLS averaged about 3,000 rental listing per year before the pandemic, Bisping noted.
Now, NorthstarMLS's for-sale inventory is down about 50%, while rental listings have increased by close to 15% — presenting an opportunity for agents and brokers to build new relationships with renters, said Bisping.
To help standardize and streamline the process, NorthstarMLS partnered with RentSpree last month to help increase rental listings and give agents more tools to manage them.
RentSpree CEO Michael Lucarelli told Real Estate News that the platform can also improve the market data available on MLSs.
"The time when you wish you had a lot of rental-based relationships is now," Lucarelli said. "Rentals can help weather market changes and fill in the gaps."
Rental services a response to demand
Other MLS leaders, like OneKey MLS CEO Richard Haggerty, are investing more in rental services because demand for rentals is way up.
Affordability has kept many would-be buyers out of the market, so renter households are waiting longer to make the leap into homeownership. NAR data indicates that the average age of a first-time homebuyer was 36 in 2022, which was an all-time high.
OneKey, with about 45,000 subscribers in the New York metro area, has seen its share of rental listings grow substantially. Rental units currently make up about 30% of the nearly 16,000 properties on the MLS, which Haggerty said is emblematic of the "extremely tight" for-sale market.
At the same time, data from the Federal Reserve Bank of St. Louis shows that New York state's rental vacancy rate fell from 5.9% in 2021 to 4.3% in 2022, one of the largest one-year declines since 1990.
"The rental market has always been a huge component, but we're seeing it expand into suburban areas at a much greater rate than before," Haggerty said.
An additional source of revenue now, a sale later
To RentBase Co-founder and CEO Noaam Blum, agents who learn how to build relationships with renters now could take their career to the next level when the market turns back in favor of buyers.
Blum spent about a decade of his life as a real estate agent. During that time, he converted about $30 million in sales from renters — and, he said, many of the most successful agents he knew also had a solid base of rental clients to bolster their portfolio.
RentBase recently partnered with The MLS/CLAW to provide rental listing processing services to the MLS's 18,000 subscribers in Southern California. Blum said RentBase can help these agents convert sales by providing them with data points that signal when a renter may be ready to move into homeownership.
These integrations can enable agents to develop long-term connections with renters, so the agent will be top of mind when that renter is ready to buy, Blum added.
"If I had help nurturing these relationships when I was an agent, I would have just retired. I wouldn't have even started RentBase," Blum said.