Will Rent Prices Go Down in 2020?
We’re entering the spring season in the rental housing market. Millions of people will be looking for apartments for rent. Some are near the end of their leases and are wondering if their income will allow them to stay where they are.
A recent uptick in apartment rentals searches may be the result of renters looking for another apartment. This would create a lot of apartment vacancies and put downward pressure on price. Some renters are heading back home to relative’s homes to live out the pandemic period.
Change in Renters Outlook and Behaviour
Will the recent economic and pandemic events change renters priorities going forward? And will rents actually fall because of this? Rents were flat to falling already, but most renters are wondering about (hoping) for a drastic fall in the rent they pay. If they don’t get it, they may abandon their now overpriced rental unit.
The Corona Virus has impacted renters and renter intent already, but the pace of change is likely to pick up considerably in the coming months. Change always brings more change. Although rents were high, renters may be desperate now to get out of their expensive leases and hunt for something cheaper (or move back in with family). This will lower occupancy rates a little.
What are the Trends and Signals this Spring?
Rent Cafe reports that searches on its rent portal have dropped 25%. Their rent affordability calculator saw a 49% drop in users. And 48% fewer renters searched for apartment utility information on the RentCafe site.
While this drop in the spring is typical of spring season on RentCafe, the search changes on Google show a sharp, uncharacteristic drop.
One explanation for this is due to the fact people are searching for products, news, and info related to the Corona Virus shutdown and pandemic.
Rent Prices Follow Demand
Typically when prices rise, it suggests increased demand and perhaps constrained supply. It’s the same for the rental apartment rental sector. When demand eases, you can expect prices to drop.
From Los Angeles to Chicago to New York and Miami, apartment hunters go online to search for their next rental home. Unfortunately, search data providers are slow in publishing rental data. Rentcafe, Zumper, and Apartmentlist all provide such data.
In terms of demand, we know that demand for short term vacation rentals has been decimated. We wonder how this drop in demand will affect longer term leased properties? Short term rentals may be converted to longer term leases, at least for 2020.
It’s uncertain whether US vacation rentals will suffer badly, as American may decide to drive within the US for a vacation this year with cheap gasoline available. Foreign vacationers may drop significantly.
Apartment Searches on Google.com
Google fortunately provides its Google Trends search tool for us to reference. There are those that refer to this search volume indicator to predict trends in the stock market. It’s pretty handy in a general sense, and you can even drill down to search volume within any city or state or country you’re interested in.
A quick look at searches for apartments for rent within the US on Google Trends showed a big drop in searches for apartments. This kind of drop has only happened during previous recessions in 2008 and 2012. In 2013, as you can see in the chart above, searches jumped back with vigor in 2013.
It’s very likely that such as jump in rent is coming. And that may result in many apartment hunters getting a jump on apartment hunting for the rest of this year. That’s provided they are still employed.
The current pandemic has a lot of tenants asking questions such as “will apartment rent prices go down?” or “are rent prices dropping?” The fact they’re asking such as questions suggests they believe rent prices will drop.
But will that happen? Landlords probably know rent prices won’t fall too much. There is a severe shortage and a decline in searches simply means handling less inquiries.
How Could There be a Recent Uptick in Searches?
Interestingly recently, an uptick in searches for apartment rentals has happened, but not in New York the epicenter of the pandemic. The recent uptick indicates pent up demand (search is back on) but renters are unemployed and have less money, so they’re looking for very affordable rentals now.
There are anomalies in the data which are hard to interpret.
Zumper reports that apartment prices have been falling since September of last year. A further steep drop in March, April and May is not outlandish.
Zumper’s Top 5 Rental Markets in March
Let’s take a look at whether there’s been a price drop in the highest 5 rent markets. Rents, according to Zumper are:
- San Francisco, CA $3500 per month. San Fran still reigns as the most expensive place to rent. It’s average 1 bedroom rent prices however dropped 0.6% to $3,500, while two bedrooms actually grew 0.7% to $4,580.
- New York, NY. In the Big Apple, 1 bedroom rent remained flat at $3,000, while 2 bedroom apartments went down 1.5% to $3,320.
- Boston, MA. In Boston one and two bedroom rents remained flat in March at $2,500 and $2,900, respectively per month
- San Jose, CA. Another big city in the Bay Area, San Jose apartment rents grew; average 1 bedroom rents rose 1.2% to $2,470 and 2 bedroom apartments climbed 2% to $3,020.
- Oakland, CA. Yet one more city in the city by the bay. Apartment rents fell 4% to $2,370 and 2 bedroom rents dropped 4.9% to $2,900.
Cities That Are Seeing Rents Go Down
Cities where 2 bedroom rents have been falling are Oakland (-4.9%), Long Beach (-3.5%), Scottsdale (-5%), Portland OR (-3.6%), Salt Lake City (-3.7%), Tampa (-3%), St Petes (-4.9%), Fresno (-3.3%), and Wichita KS (-4.1%).
Biggest declines in rent for 1 Bedrooms happened in Oakland (-4.1%), Seattle (-2.2%), Chicago (-4.6%), Providence (-4.7%), Plano TX (-2.4%), Pittsburgh (-4.3%), Buffalo (-5.3%), Reno (-2.9%), Durham (-3%), Arlington TX (2.3%), Lincoln (-4.9%), and Wichita (-4.4%).
So Are Rental Home and Apartment Prices Falling?
Based on all the statistical above evidence, it appears apartment prices are falling. And the charts point to a steeper drop than we can see right now.
With less tenant income and evictions looming no doubt, a big decrease in rent prices across the nation might be at hand. Other countries such as Australia, Canada, Germany and the UK are likely going to experience the same drop.
As our economies begin to recover though, we might expect rent prices to reverse the trend. The recession could present more rental housing from being built, and this would lift prices into 2021.
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See also: Will Rent Prices Drop? | When Will House Prices Drop? | Apartment Rental Prices | What to Look for in a Rental Apartment | Corona Virus and Apartment Rental Market | Best Cities to Buy Apartments | Best Apartment Upgrades | Property Management Software | Housing Market Forecast 2020 | Hawaii Housing Market | Berlin Apartment Market | Australia Housing Market | UK Rental Market | California Housing Market | Apartments for Rent | How to Reduce Tenant Turnover | Should I Buy or Rent in 2020? | Property Management App | ManageCasa Property Software