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Rent Prices Speed Past Pre-Pandemic Projections

non-owner-occupiedWhen Covid-19 lockdowns began last year, single-family rental prices slowed to stagnant. But as the the price of real estate appreciated at staggering rates over the past year, rent price growth recovered and now has "sped past what their levels are projected to have been based on pre-pandemic trend," according to Zillow's latest market report. Researchers there call it "a milestone in the strong rental market recovery."

Home prices continue to break records but show some signs of stabilization.

The average monthly rent price nationally hit $1,843 in July, surpassing June's record appreciation and rising 9.2%, or $156, above July 2020.

"With the economy continuing to reopen, employees receiving more long-term guidance on remote work, and as students find their way back to college campuses, the rental market is picking back up," said Nicole Bachaud, Zillow Economic Data Analyst. "As high demand puts pressure on rents and incomes are unable to keep up, affordability will become more of a challenge in the coming months."

Zillow estimates rents are now $52 higher than they would have been if the past 18 months had been more normal. Rents first surpassed their pre-pandemic trajectory last month, Bachaud added.

Rents in nine major metropolitan areas, all across the Sun Belt, are at least 10% higher than would have been expected based on pre-pandemic trends, topping out at 15.6% higher in Tampa. Rents in just nine metros are lower than projected, and nearly all are expensive coastal markets: Los Angeles; Washington, D.C.; Chicago; Minneapolis; Seattle; Boston; New York; San Francisco; and San Jose.

The top 14 metros for annual rent growth are scattered across the Sun Belt, led by Phoenix, up 23.1%, Las Vegas (22.7%), Tampa (21.4%), and Riverside (19.9%). July rents are also positive year over year in all major metros, with holdouts New York, San Francisco and San Jose finally posting yearly growth.

For-sale inventory rose 4.5% from June too July, marking the third consecutive month of rising supply.

Home value growth again broke monthly and annual records, with year-over-year appreciation of 16.7% and monthly gains of 2%. This brings typical home values measured by Zillow's Home Value Index (ZHVI) to $298,933, up nearly $43,000 over last July. The end of rampant price hikes may be on the horizon, however, as 22 of the nation's 50 largest metros had slower monthly growth than in June, according to Zillow.

"All signs point to the likelihood that the housing market is beginning to ease off the gas pedal," said Bachaud.

Some experts have pointed out that as renting becomes less affordable, homeownership could begin to appeal to more young adults. As Zillow Researcher Manny Garcia reported months ago, "homeownership still appears to be a priority and aspiration among those sometimes called the rent forever generation," referring to a Business Insider article on millennials opting out of homeownership.

Metropolitan
Area*

Zillow Home
Value Index

(ZHVI)

ZHVI –
YoY
Change 

Zillow
Observed
Rent Index

(ZORI) 

ZORI –
YoY
Change

ZORI –
MoM
Change

Inventory –
MoM
Change

United States

$298,933

16.7%

$1,843

9.2%

1.9%

4.5%

New York, NY

$552,607

13.3%

$2,671

1.7%

2.3%

2.4%

Los Angeles–Long Beach–Anaheim, CA

$831,593

19.3%

$2,553

6.9%

1.7%

2.8%

Chicago, IL

$280,130

13.4%

$1,746

3.5%

1.0%

5.4%

Dallas–Fort Worth, TX

$313,393

19.4%

$1,642

12.4%

2.4%

4.5%

Philadelphia, PA

$302,822

16.9%

$1,710

6.1%

1.0%

4.8%

Houston, TX

$258,174

15.0%

$1,504

8.8%

1.9%

3.3%

Washington, D.C.

$512,936

14.2%

$2,107

3.8%

1.6%

5.3%

Miami–Fort Lauderdale, FL

$355,793

14.7%

$2,249

17.1%

3.2%

-4.0%

Atlanta, GA

$301,104

19.6%

$1,787

17.6%

2.9%

2.5%

Boston, MA

$592,940

16.7%

$2,557

2.7%

1.1%

-0.3%

San Francisco, CA

$1,324,433

17.8%

$3,082

0.9%

1.6%

3.4%

Detroit, MI

$220,309

17.8%

$1,387

10.5%

1.5%

10.2%

Riverside, CA

$495,619

25.1%

$2,358

19.9%

2.5%

6.0%

Phoenix, AZ

$390,733

29.8%

$1,746

23.1%

3.2%

1.6%

Seattle, WA

$670,473

22.7%

$2,125

6.2%

2.4%

4.6%

Minneapolis–St. Paul, MN

$347,512

14.0%

$1,605

4.1%

0.6%

6.3%

San Diego, CA

$792,531

26.0%

$2,577

11.9%

2.3%

5.7%

St. Louis, MO

$216,727

15.9%

$1,224

8.1%

1.4%

4.9%

Tampa, FL

$295,532

23.7%

$1,819

21.4%

3.8%

2.4%

Baltimore, MD

$345,194

13.8%

$1,749

9.9%

1.8%

6.0%

Denver, CO

$554,544

20.4%

$1,872

10.2%

2.2%

8.1%

Pittsburgh, PA

$196,897

19.1%

$1,247

4.8%

0.1%

7.1%

Portland, OR

$515,049

19.1%

$1,753

8.9%

1.7%

6.5%

Charlotte, NC

$303,816

20.5%

$1,628

13.6%

2.1%

4.9%

Sacramento, CA

$540,438

23.6%

$2,142

14.2%

2.6%

San Antonio, TX

$250,108

17.0%

$1,344

11.0%

2.7%

1.6%

The full market report is available at Zillow.com.

Investors in build-to-rent communities and homes, as well as all single-family rental investors, are encouraged to attend this fall's Single-Family Rental and Investment Roundtable, part of 2021 Five Star Conference and Expo, September 19-21 at the Hyatt Regency Hotel in Dallas, Texas. 

About Author: Christina Hughes Babb

Christina Hughes Babb is a reporter for DS News and MReport. A graduate of Southern Methodist University, she has been a reporter, editor, and publisher in the Dallas area for more than 15 years. During her 10 years at Advocate Media and Dallas Magazine, she published thousands of articles covering local politics, real estate, development, crime, the arts, entertainment, and human interest, among other topics. She has won two national Mayborn School of Journalism Ten Spurs awards for nonfiction, and has penned pieces for Texas Monthly, Salon.com, Dallas Observer, Edible, and the Dallas Morning News, among others. Contact Christina at christina.hughesbabb@thefivestar.com.
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