The demand for housing keeps on climbing as rental prices hit double-digit growth for the first time in two years, according to Realtor.com’s Monthly Rental Report. The pace has grown three times faster than in March 2020, prior to the onset of COVID-19, and has been hitting double-digit gains over the past year in more than half of the 50 largest U.S. metros.
The U.S. median rental price hit a new all-time high of $1,633 in August as rent growth accelerated 11.5% year-over-year. The U.S. metros leading the way in price growth are Tampa (+30.6%), Riverside, Calif. (+28.6%), Miami (+27.0%) and Phoenix (+25.5%).
Broken down by unit size, two-bedroom apartments reached an all-high of $1,828, one-bedrooms reached an all-time high of $1,524 and studios reached a high of $1,338. The more significant price growth in two-bedroom units (+12.3%) conveys the demand for more space during the pandemic. One bedroom units also reached double digit growth (11.6%) in August, and even smaller studio units had a sizable increase (8.3%) over the past year, reaching a median of $1,338 per month.
"Put simply, August trends suggest rents are making up for lost time,” said chief economist of Realtor.com, Danielle Hale. “Rents remained low during some of the worst months of the pandemic, growing at a sub-2% pace from September 2020 to March 2021, which is also when for-sale home prices were growing by double-digits. Now we've reached a stage in the COVID recovery where people are ready to move, and we're seeing urgency to find new living spaces immediately.”
Rents are continuing to surge in the majority of large markets, led by secondary metros. In 28 of the 50 largest U.S. markets, rents had double-digit gains over last year in August. Median rental prices increased at least 21% year-over-year in each of the top ten metros. These include Tampa (+30.6%), Riverside (+28.6%), Miami (+27.0%), Phoenix (+25.5%), Las Vegas (+23.4%), San Diego (+23.4%), Memphis (+21.8%), Austin (+21.7%), Orlando (+21.4%) and Atlanta (+21.2%).
Secondary metros are becoming more popular because they offer affordable housing and balanced lifestyles, which has helped to attract big tech city renters working remotely during the pandemic. Surprisingly, rental prices in Riverside are rising at a faster pace than nearby Los Angeles at 10.2% in August, marking the highest rent gains for the fourth straight month.
“A lot of this demand can be attributed to vaccines opening up offices and city-life, young adults feeling more confident to strike out on their own, and homebuyers needing to take a break from the red hot housing market,” Hale added. “And many are willing to pay top dollar to make that happen quickly, which may lead to even more growth in rents over the next few months.”
Hale also pointed out that many of today’s renters are future homebuyers, and their dreams of one day finding an affordable abode is slipping further out of reach. “Whether you plan on buying a home in 2022 or 2027, it's important to remember that housing costs are typically your largest monthly expense,” Hale said. “In other words, what you spend on rent will impact how much you have left to save. Prospective renters can use tools like the Realtor.com Rentals app to search for and set up custom search alerts about rentals that meet their criteria – including price ranges – to help them stay on-budget."
