National Rent Prices Rising Again
It appears the low rent trends for apartments and moderate rent price trends for houses during the pandemic is ending. Zumper believes rent prices are heading up in a major way which means landlords are raising the rent.
Whether you just want tenants to pay back rent, avoid evictions and return to normal, or to pick up a few new rental houses, the news of late is hopeful.
Landlords have suffered through a tough 2020 and into 2021, yet there is some good news:
- rents are rising
- rents are rising fastest in expensive cities
- pandemic stimulus money unspent may be used to help the rental market crisis
- new stimulus funds specifically to clear rent in arrears
And as renters come back to urban markets and more renters move to new cities and states, and as home prices rise, how will rent prices play out this summer and fall? Our bet is that they will rise and that 2 and 3 bedroom units will see considerable more demand. Many millennials hoping to buy houses will be disappointed and resign to renting.
As many leave their relatives homes after their pandemic hideaway, the rental market may be there only option. As investors see the value in buying rental homes, the competition should drive price growth.
Special thanks to Zumper and Apartmentlist for the monthly reports which you can dig into more deeply on their websites. Both services agree on most trends, however take note of where they don’t.
Zumper Rent Report for June
The most recent report from Zumper shows rents jumping sharply versus twelve months ago.
Zumpers’ various rent reports show how diverse the rental market has become. Prices have been flat in most metros (although down in Manhattan and San Francisco) yet have risen in smaller towns and cites where renters have migrated to. That migration represents a huge challenge to urban landlords who must find ways to reach those in the cities willing to rent in high density, high cost zones.
Stats show vacancy rates in urban zones are lowering, however reports show workers are quitting their jobs instead of moving back to the city. Large employers will need to hire new workers willing to pay high rent prices near their headquarters and other offices.
Marketing will be a bigger factor in landlord and property manager success in 2021/2022. Wooing workers back to smaller apartments in the city will take time, but given the steepening rental housing shortage, vacancies will be filled.
Rent growth in pandemic destination cities is beginning to wane.
Last year’s rents went flat in large metros.
Rent prices, especially apartment rent prices tumbled in 2020, yet are climbing as depicted in this updated chart below from Apartmentlist. Zumper says rent growth is up strongest in the more expensive cities. San Francisco had the highest year over year gains for 1 bedroom units among the three major Bay cities at 5.3 percent.
Cities in Texas were among those with the highest growth in rent prices. The rising price of oil and Texas zero income tax is luring a lot of renters/workers/investors to the Lone Star State.
In the housing market, prices are rocketing and they are by far outpacing rent prices.
How long can rent prices not follow home prices? And as Covid 19 recedes due to the vaccinations, it shouldn’t be long before many who were living with relatives to begin their hunt for their living space. According to Apartmentlist, 9 out of 10 of those cities worst impacted by the pandemic exodus, are seeing price rebounds. While the K-shaped recovery from the pandemic recession could see the loss of employed renters, it may not affect demand for most segments for Class A and Class B apartment properties.
Single family rental properties are different class of rental property and you can learn about them in that post.
Glut of Apartments in some cities a tough challenge for Urban Landlords
Investors are scooping them up in anticipation of workers returning to the cities, student returning to school, and young people living at their parents venture back out onto their own. There aren’t enough houses to supply the market, and there is little in the way of affordable homes for sale.
And the economic recovery this summer will only fuel demand for rentals. As Apartmentlist’s survey reveals, some smaller cities are seeing very strong price growth (e.g., Boise Idaho has risen beyond last reports 14% to 16% now).
Zumper too backs up Apartmentlist’s market rent price info and shows how the migration out of the big metros to neighboring suburbs or smaller cities has pushed up rent prices in those locations. They also show how the trend to the smaller cities/towns is waning as price growth is moderating there and beginning to rise back again in the big metros.
Zumper found San Francisco, New York, San Jose, Seattle, Miami, St Petes, Cleveland, Rochester, and Detroit suffered the largest drops in 2 bedroom rent prices. In one bedroom apartments, San Francisco, Oakland, Los Angeles, Seattel, St Petes, and Buffalo had the largest reductions in rent prices. The California and New York markets for smaller rentals has its marketing and leasing job cut out for it.
Rent Prices by City, Zumper Estimates for June
These were the top cities with the highest month to month growth in rent prices (June).
With the ending of the pandemic, 2022 is looking good for landlords. During this lull in the action, it’s smart to test a more modern property management software. It’s easy and free.
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