Oct 6, 2021 - Economy

The days of cheaper rentals are over

Most expensive cities, by median monthly rent
Data: Dwellsy; Chart: Axios Visuals

Rent prices are rising rapidly across the country, and the number of people seeking rental apartments has returned to pre-pandemic levels or higher, according to home-search websites.

Why it matters: As COVID-era restrictions expire — including moratoriums on evictions — and available housing stock continues to dwindle, expect once-desperate landlords to sit in the catbird seat as renters fork up.

  • Rents are up 9.6% nationwide in 2021, to an average of $1,649 a month, according to Dwellsy, which calls itself the largest rental housing platform in the country. 
  • "Renting activity is back to pre-pandemic levels — up 13% in the first half of 2021 compared to the same time last year," per RENTCafé. It adds that the two groups pushing rents up most are Gen Z and high-earning millennials.
  • "Every one of the nation’s 100 largest metro areas has seen month-over-month rent growth over the last five months," Christopher Salviati, economist for Apartment List, tells Bloomberg.

Low-income city residents are particularly at risk, and some will likely face homelessness. Rent increases "of 20% or more are making life difficult" for them, "just as eviction bans and unemployment relief are running out," per Bloomberg.

  • Rents were up "an average of 11.5%, or $200, compared to last August," Bloomberg said, citing data from Zillow.
  • Cities with the steepest rent hikes include Boise, Idaho, and Phoenix, according to Zumper.

What's happening: In a complete reversal of last year's trends, tenants are "facing sticker shock," per the WSJ.

But nowadays, "the most ambitious landlords are attempting to raise rents by as much as 80%," a broker at Warburg Realty tells the Wall Street Journal.

  • Bidding wars "are breaking out for rental units in some sought-after neighborhoods," which normally only happens in the for-sale housing market.

The big picture: It's not just rentals. Prices for real estate across the board are rising like crazy.

  • "In June 2021, home prices across the U.S. surged 24.8% year-over-year — to a median sale price of $386,888 — according to Redfin," per Yahoo Finance.
  • "During the same time period, the number of homes sold increased 20.6% and the number of homes for sale tumbled 39.6%."
  • A "frenzy" has seized the Manhattan real estate market, where median resale prices reached an all-time high in the second quarter, reports CNBC.

What they're saying: "The U.S. rental market is a mess right now," Jonas Bordo, CEO and co-founder of Dwellsy, tells Axios via email.

  • "Demand is high due to record levels of household formation and a range of other factors, while supply is constrained due to the hot home sales market and slower deliveries of new properties," Bordo said.

The intrigue: While the rental market seems to be getting more expensive everywhere, different companies tracking the phenomenon are seeing different trends.

  • RENTCafé, an apartment-hunting site, says that New York City has seen "the most spectacular comeback, leading the trend, with double its rental activity compared to last year, while San Francisco had the second-highest increase in renters moving in."
  • Its August 2021 list of the highest rents puts Manhattan at the top, at over $4K a month, followed by L.A., Seattle, Washington, D.C., and Chicago.
  • Dwellsy — which says its rental database is much larger than RENTCafé's and that it ranks metro areas rather than submarkets like Manhattan — puts the New York metro area at No. 15 of the most expensive cities by monthly rent.
  • Some of the most expensive rental markets topping its list are also exurbs of hot markets: Silverthorne, Colorado, is about 70 miles from Denver, about the same distance as Santa Cruz is from San Francisco.
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