Housing Rents Pick Up After Eight-Month Lull
Rental markets in pricey high-tech hubs like San Jose, San Francisco and Seattle continue to struggle.
Rent growth in the nation’s 50 largest housing markets saw its first uptick since the pandemic began in March.
Rents grew 1.1% year-over-year, according to the realtor.com Monthly Rental Report. Still, rental markets in pricey high-tech hubs like San Jose, San Francisco and Seattle continue to struggle.
The US median rent, which is calculated by averaging the median rent of the 50 largest metros, averaged $1,463 in March. Previously, rent growth had slowed from 2.2% in July 2020 to just 0.6% in February 2021.
Expect that rent growth to accelerate in the coming months, even though the market is below the 3.2% growth it was experiencing before COVID, according to realtor.com Chief Economist Danielle Hale.
Still, rents are not growing in all markets.
“The tech markets and several big metros like Chicago and Los Angeles continue to see rent declines, but generally at a slower pace than in recent months, which could signal a turnaround in the coming months,” Hale said in a prepared statement.
New Orleans led the nation in rent growth for the third month in a row, with the median rent up 15.6% year-over-year to $1,305. Riverside, Calif. (13.2%), Memphis, Tenn. (11.8%) and Sacramento, Calif. (11.6%) also saw double-digit rent increases. Richmond, Va. (9.9%) also saw strong growth.
On the other end of the spectrum San Jose, Calif. (-14.1%), San Francisco (-10.1%), Seattle (-9.7%), Boston (-7.4%), Washington, D.C. (-6.3%) and Los Angeles (-5.5%).
As home prices hit record highs and interest rates continue to climb, Hale thinks there may be an increased appetite for rentals as more would-be homebuyers wait for the next season. This potential demand could gradually push rents higher. After some time, they could reach pre-pandemic levels.
Rent spreads are also improving, according to the BTIG Monthly Apartment REIT Report.
While rent spreads on new apartment leases were negative 0.6% in March on a year-over-year basis and negative 0.8% on a 12-month basis, they are up from the low they hit in September 2020, with a 1.3% year-over-year drop.
BTIG expects rent trends to accelerate as people return to their offices. It anticipates demand picking up in the summer before expected office and university reopenings in September.
New lease growth in March was the strongest in Atlanta, Charlotte, Richmond and Tampa, according to RealPage. New lease rent spreads on the coasts have bottomed out, except for Seattle, which continues to struggle. BTIG notes that suburban submarkets such as Orange County, Calif., and New Jersey performed better than urban centers.