Looking for a new apartment is a difficult task and it’s especially challenging to know how much you should spend on your new apartment when prices can vary so drastically. The affordable apartment you liked yesterday may not be so affordable today. You may be asking, “How can the price be so different after just one day?”
6 factors that impact apartment prices
There are many factors at play in apartment pricing. Here are some of the biggest to keep in mind when searching for a new place to live.
1. The time of year
Believe it or not, the time of year can definitely affect apartment prices. Generally speaking, if you’re looking for an apartment in the winter, your price will likely be much lower than in the summer. That’s because the “moving season” is usually between May and September.
Many people, such as students, start looking for their first apartment during the summer to prepare for the upcoming school year. Or, families are looking to move when the kids are out of school and often start to look for a new apartment in the summer. Plus, moving in the spring, summer or early fall usually guarantees better weather so you aren’t moving in the cold months of winter.
While the demand for an apartment in the winter is much lower, the price will be, as well. Keep in mind, though, this is because supply is also lower so you might not have as many options. However, the ones you do have will probably be listed at a considerably lower price. If you’re not too picky about what type of apartment you live in, you’ll be able to find a less expensive option in the “off season.”
Hot tip: If you’re signing a lease in summer, consider an 18-month lease, so your renewal rolls around in the winter. Who knows? This timing might positively impact a potential renewal rent price.
2. The time of the month
Most leases expire at the end of the month and they usually require a 30-day notice, therefore, apartment availability is posted at the beginning of the month. This is when most options will be available to you. If you want lots of options at your fingertips, start apartment hunting and planning so it lines up with the beginning of a new month. This will give you plenty of options to choose from and you’ll be able to compare and contrast apartment prices between complexes.
The beginning of the month is also the least expensive time to rent and the end of the month is the most expensive. However, don’t entirely discount the middle of the month. Anything still available has probably been sitting for a while. Every day a unit sits empty, the owner loses money. Keep your eye out for mid-month rent specials.
3. The day of the week
If you want to rent from the hottest complex in town, be strategic about the day you apply. If you want the best deal, apply for your apartment on Monday or Friday. If you apply on Tuesday or Sunday, you might pay more. Also, the best time to look is around 9 or 10 in the morning — that’s when property managers are most likely to post new listings. That’s because most people come into the office, get settled and start the day’s work around that time. If you can coordinate the timing of when you search and are willing to compare prices day over day, you can snag the best deal available to you when looking for a new apartment.
4. Dynamic pricing software
If you’ve ever bought an airline ticket or rented a car, you’ve experienced dynamic pricing software. It’s basically an algorithm that determines the optimal price for a specific date and time.
Airlines have been doing this for many years. But does it really work for rental properties? The answer is yes. Landlords use this software to see what’s trending on the market and what’s in demand and fluctuate the prices accordingly. About 20 percent of all apartment complexes use this software.
If you’re looking to get the best price for your apartment and want to know when apartment prices drop, conduct a daily search so you can get a feel for all the price variations day over day and hour over hour.
5. Strong growth market
A strong growth market is great for the local economy. However, increased housing demands mean increased rent prices at the drop of a hat. Don’t let this scare you away from living in a strong growth market. You simply need to be strategic, weigh your options and avoid procrastinating. Do your research as a long commute may be more expensive than the increased rent.
Location plays a large part in the pricing of apartments. Big cities, such as New York, Los Angeles and Miami, have higher rent prices due to their popularity. Keep in mind cities are always trying to see what they can do to become the next popular, trendy place to live, so if you get into an area soon enough you could grab a great deal before rent prices spike.
When do apartment prices drop?
According to the statistics, you want to apply for a unit after you ring in the new year. Enjoy your Christmas vacation, though: The end of December is the most expensive time to rent. If you can put down your application on the first Tuesday in January, you’re in business! The winter months are an undesirable time for moving. The beginning of the month is when rates are lowest. Also, Monday or Tuesday are the cheapest days.
How much should I spend on an apartment?
If you’re wondering how much you should spend on your apartment, there are a couple of different schools of thought:
30 percent rule
The 30 percent rule suggests that you only spend up to 30 percent of your paycheck on rent. For example, if you make $50,000 a year, your annual rent budget should be no more than $15,000 per year, or $1,250 a month. Keep in mind this doesn’t always work if you want to live in a city like New York or Los Angeles, as rent prices are usually higher and you might not make enough income in contrast to rent prices.
There’s also the 50/30/20 rule. This is where you divvy up 50 percent of your income for needs, such as rent, utilities and insurance. The next 30 percent goes to things like grocery shopping, debt and other expenses and, lastly, 20 percent goes to savings. This method should help you budget for an apartment.
It’s also smart to know the average cost of living in different cities and states. This can help you gauge if you’re paying too much or getting a great deal on a place. Obviously, rent prices are going to vary depending on the apartment complex you choose and the city, but it’s nice to know if you’re generally paying the same price compared to the people you live next to.
Understanding apartment prices before signing a lease
At the end of the day, how much you should spend on rent is really up to you and what you’re comfortable with paying. It varies greatly from person to person, depending on various factors, such as income, location, job stability and lifestyle.
If you understand when apartment prices drop and why apartment prices fluctuate, you can get a better understanding of what to pay and how you’ll budget for it. Hopefully, with these tips on why rent varies, it’ll make your decision a little easier.