Realtor.com’s latest Monthly Rental Report has found that, despite sharp declines during the time of the pandemic, large metro U.S. cities considered tech hotbeds have rebounded, and with it, comes a rebound in high rental prices. Realtor.com’s analysis of rents in the 10 biggest U.S. tech cities, including Austin, Texas; Seattle, Washington; and San Francisco, California, surpassed readings reported in March 2020 by an average of 6.3%.
"With rents continuing to surge to new highs nationwide, including in big tech hubs, September data confirms the U.S. rental market has moved past the recovery phase and is fully back in business. Rental demand remains unseasonably high, driven by still-limited housing supply, rising mortgage rates pushing buyers towards renting, and more people returning to big cities," said George Ratiu, Manager of Economic Research for Realtor.com, commenting on the study. "At the same time, it's important to put recent rental activity in the context of housing trends throughout the pandemic. Rents didn't rebound from COVID declines as quickly as for-sale home prices, but rental activity has now reached a level not unlike the homebuying frenzy seen earlier this year, before fall seasonality kicked in. The good news is that if rents continue to parallel home listing prices, rental price growth could potentially begin cooling this winter."
At the outset of the pandemic in March 2020, many city-dwellers sought larger and more spacious living quarters, as the option to work remotely became more commonplace. As more and more became vaccinated beginning in April 2021, larger urban rental markets began to show signs of resiliency, eventually hitting its stride over the past two months, with September data showing big city rents not only having recovered, but are making up for lost time with double-digit gains.
The average rental rate across the 10 biggest U.S. tech cities grew by 9.9% year-over-year in September and was 6.3% higher than in March 2020. For comparison, average big tech metro rents declined by as much as 7.2% at the height of the pandemic. The top 10 markets exhibiting the greatest media rent include:
- San Francisco, California with a county median rent of $3,450, 9.5% year-over-year change
- New York, New York with a county median rent of $3,400, a -2.9% year-over-year change
- Santa Clara/San Jose, California with a county median rent of $3,015, 10.8% year-over-year change
- Los Angeles, California with a county median rent of $2,895, a 9.2% year-over-year change
- Washington, D.C. with a county median rent of $2,370, a 6.2% year-over-year change
- Boston, Massachusetts with a county median rent of $2,750, a 1.9% year-over-year change
- Seattle, Washington with a county median rent of $2,220, a 17.9% year-over-year change
- Denver, Colorado with a county median rent of $2,034, 13.8% year-over-year change
- Chicago, Illinois with a county median rent of $1,700, a -2.9% year-over-year change
- Austin, Texas with a county median rent of $1,695, a 25.6% year-over-year change
As Realtor.com noted, some of the cities with September's biggest annual rent gains, such as Austin (+22.3%) and Denver (+15.5%), did not necessarily experience the steepest COVID declines among big tech hubs during the pandemic.
"The days of rental deals in metros like San Francisco and Manhattan may be over, but there is a silver lining for renters with more flexible timelines. Big city rental competition and high prices is a sign of normalcy, which could precede more seasonal norms like winter cooling in rent growth in parts of the U.S.," Raitu said. "For renters on tighter schedules, compromises will be key to staying on budget and not getting swept up in bidding wars. If location and size are your must-haves, consider deprioritizing extra amenities or upgrades.”
The report also noted that national rents grew at a double-digit pace for the second consecutive month over last year, and at a rate higher than found in August. September's rent growth was faster than in a typical year, but month-over-month has been decreasing since the summer.
The demand for more space continues to drive the highest price growth among larger rental units, led by two-bedrooms at a yearly increase of 14.4% to $1,855. Single-bedroom units also saw a sizable increase (+13.7% year-over-year) to $1,542 in September, and for the first time in 2021, studio rental space growth hit double-digits, up 11.3% over last year, to a median of $1,351 per month.