While housing continues to be a good investment with its surge in prices, the rental market continues to show a strong surge in rent price increases in Sun Belt metros. Just like housing, the rental market faces a supply and demand problem.
According to a Realtor.com report, rents have gone up 20% in the last two years in the country’s 50 largest markets and aren’t likely to start declining anytime soon.
The real estate listings website said in its monthly renter’s report that national rents hit a new high of $1,807 a month in March with Sun Belt metros leading the way in rent hikes. Miami, where rent increased by 58%, led the way, followed by Riverside, California, at 48.2 % and Tampa, Florida at 45.8%.
The median rent in Miami stood at $2,998 in March, $2,687 in Riverside and $2,114 in Tampa, according to the report.
Danielle Hale, chief economist for Realtor.com, said asking rents are nearly 1.2 times higher than two years ago and that the March report highlights the affordability challenges faced by many Americans.
“At the same time March rental trends offer early signs of relief from the feverish pace of rent growth, which moderated year over year for the second month in a row,” Hale said. “We expect cooling to continue over time, but the jury is still out on whether rent growth will hit single digits by the end of the year.”
Hale said the issue is largely due to the mismatch between rental supply, with vacancy rates at record lows, and demand rising as some would-be buyers potentially turn to renting in the face of higher home prices and mortgage rates.
“While the jobs market is strong, it’s unlikely that we’ll see enough income growth to keep rents under 30 percent of monthly paychecks - especially with higher inflation and everyday costs.
The silver lining to that scenario for renters, Hale said, is that rents won’t be able to sustain an accelerated pace if incomes can’t keep up with them.
Renters in some of the country’s largest tech cities got a relative break on the percentage of increases, although not necessarily in the overall monthly cost. Five of the top 10 smallest increases were in those cities, led by San Jose, California, where rents increased by only 0.1% to $3,075. The other tech cities in the top 10 were: San Francisco, California, at 0.3% ($2,982); Washington, D.C, 5.1% ($2,093); Seattle, Washington, 6.1% ($2,129); and Chicago, Illinois, 6.7%, ($1,856).
