Americans who feel priced out of the surging housing market have until now been able to take solace in one thing: if they can't buy, at least they can rent. But that might be changing.
Why it matters: Rents have been growing fast enough to keep investors happy in the face of a major pandemic, but not — yet — so much as to become unaffordable. Rent increases average about 2.5% per year in multifamily units, per Yardi Matrix, while Zillow shows rents nationally up 1.5% from a year ago.
By the numbers: Big cities continue to do the best at keeping rent increases low or even negative. Over the past two years, rents in New York have declined by 9.3% to $2,530 per month on average, while San Francisco is down 9% to $2,878.
- Even cities with major housing booms have seen relatively small rent increases. Austin rents are up 2.5% to $1,489 over the past two years, per Zillow, even as its house prices have risen 30.6%; Los Angeles rents are up 1.7% while its home prices have risen 16.5%.
Yes, but: The era of subdued rent increases might be coming to an end. Realtor.com's May rental report shows rents up 7.5% over the past two years, and accelerating rapidly, with larger homes increasing at a faster pace than smaller apartments.
- That suggests the other shoe dropping — higher house prices finally showing up in higher rents as of May.
The bottom line: The dire housing shortage will inevitably be felt in rental prices, even if house prices are more volatile. But with houses starting to get out of reach, renting is likely to remain the cheaper option in many big markets for the foreseeable future.