Where are rental rates rising and falling the most in America? What difference does it make for investors?
The latest data shows an incredibly disparate US rental market, with some cities experiencing declining rents, and others showing great growth. How might this data impact investment decisions now?
The Improving Rental Property Market
While landlords haven’t reported widespread distress over the past year as expected when pandemic lockdowns arrived, we seem to be seeing even more improvement and optimism in this sector in 2021.
With the exception of some wealthy executives squatting in multimillion-dollar mansions in The Hamptons, it seems most renters have done their best to keep up with their rents. Government stimulus of various types has also helped to keep cash flowing.
The recent ruling overturning the national eviction ban and calling it unconstitutional has also brought a lot of confidence back to the market.
Any foreclosures that do happen as a side effect of a year of restrictions are only likely to help bolster the rental market. With historically high migration and moving activity driving occupancy rates and rental increases.
With states like Florida reporting an equal number of job openings to unemployment claims, it seems we are at virtually zero unemployment for those who want to work.
The demand for income properties is surging thanks to being seen as an inflation hedge, and after investors have witnessed the bizarre fall of bitcoin and the rise of the wild SPAC bubble.
Where Rents Are Falling The Most
According to Zillow and Seeking Alpha, rents are unsurprisingly falling the most in:
- New York – 8.7%
- San Francisco – 8.6%
- San Jose – 6.8%
- Boston – 5.5%
- Seattle – 4.3%
- Washington DC – 3.1%
- Chicago – 2.5%
Most would have already considered most of these markets overpriced and ready for a correction. Recent events, restrictions and unrest have only added to the motivation for residents and investors to leave these areas.
Where Rents Are Rising The Most
The same data sets show that rents have been rising the fastest in:
- Riverside + 11.6%
- Tucson + 10.7%
- Phoenix + 10.4%
- Memphis + 9.9%
- Providence + 9.7%
Rental rate growth in these markets may not be sustainable at these rates over the next couple of years. There are many wild cards that may be played, impacting whether recent moving trends will stick, fade or reverse course.
More Modest Rental Rate Increases
The median US rental rate increase for the 12 months to April 2021 was 4.1%.
Among the markets with more modest, and perhaps more sustainable growth looking forward were:
- Tampa + 8.3%
- Atlanta + 7.5%
- San Diego + 5.2%
- Houston + 1.1%