Big Cities Push Apartment Rent Accelerations
In May, two-bedroom rents rose 4.8% compared to last year, while one-bedroom rents rose 3%.
National rents accelerated faster in May, driven by growth in big cities like New York, according to the Zumper National Rent Report.
Overall, rents have been growing at around 1% in 2020, but activity picked up in May. Two-bedroom rents rose 4.8% compared to last year, while one-bedroom rents rose 3%. The median rent is now $1,254 for a one-bedroom and $1,544 for a two-bedroom.
Coastal markets are driving this growth, while rent in cheaper cities remains flat. In January, rent was down 20.1% in the eight most expensive cities since the beginning of the pandemic. Now it is down 16.3%. In the next eight most costly cities, rents are now up 1.2% after being down 8.7% in March.
In San Francisco, Oakland, and San Jose, one-bedroom rents posted month-over-month gains for the first time since the pandemic began. In San Francisco, the median rent for a one-bedroom rose 1.9% compared to the previous month. In Oakland, it rose 1.5%, and in San Jose, it jumped 6.3%.
Still, there is room for growth in the market. One bedrooms in San Francisco are down 21.1% compared to a year ago. While one bedrooms in Oakland are down 15.7%, San Jose’s are down 9.9%.
Yet, San Francisco remains the most expensive market in the country, with one-bedroom rents of $2,650. It was followed by New York ($2,530), Washington ($2,220), Boston ($2,180) and San Jose ($2,180).
Zumper predicts that seasonal trends, like college students coming back to school and recent grads moving to San Francisco for a job, will put more pressure on rents in the market if the course of the pandemic continues to improve. But the tech industry adopting permanent work-from-home policies could limit how much rents improve.
“New Yorkers have returned to the city in dramatic numbers in the last few months, causing enormous spikes in leasing activity,” Zumper wrote. “A similar rush back to San Francisco may still occur, but it’s notable that it hasn’t yet.”
One strong pandemic market that continues to thrive is Phoenix. The Glendale suburb has posted a 15.7% year-over-year increase in rent for one-bedroom apartments. In Phoenix proper, they rose 9.1%. For two-bedroom apartments, it’s even more striking. Phoenix suburbs Gilbert, Chandler, Glendale, Scottsdale are four of the ten cities with the most year-over-year growth in rent in two bedrooms. Each has seen a more than 16% spike in rent, according to Zumper.
The single-family rental market has also fared well in Phoenix, according to CoreLogic. It posted 11.4% growth between March 2020 and 2021. Tucson, Arizona (+10.4%) and Atlanta, Georgia (+8.1%) also saw significant increases.