U.S. rental prices grew by nearly 20% from March 2020 to 2022 during the pandemic, according to the Realtor.com Monthly Rental Report recently released. Additionally, two-year rental trends indicate some redistribution of higher rents across the 50 largest markets during COVID, as renters migrated from expensive big tech cities to relatively more affordable areas. Sun Belt metros topped the list of fastest-growing rental markets from March 2020-2022, led by Miami, Riverside, Calif. and Tampa, Fla., while big tech hubs posted many of the country’s smallest two-year rent gains.
“With asking rents nearly 1.2 times higher than two years ago, our March data highlights rising rental affordability challenges faced by many Americans today,” said Realtor.com® Chief Economist Danielle Hale. “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. 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 2022. This 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% of monthly paychecks – especially with higher inflation and everyday costs. Still, there is a silver lining for renters, as rents won’t be able to sustain an accelerated pace if incomes can’t keep up.”
Rents grow by nearly 20% in the two years since the pandemic began
The U.S. median rental price hit a new high of $1,807 in March, up 19.3% in just two years, highlighting a roller coaster ride of change since the pandemic began. Following a slowdown in 2020 at the onset of COVID, rents significantly made up lost ground in 2021 and have since maintained a feverish pace of annual rent growth. In fact, March marked the eighth consecutive month of double-digit annual rent gains (+17.0%), even as the pace moderated slightly over February (+17.1%).
Although the underlying reasons have shifted over the course of the pandemic, data suggests that renting remains a popular option for Americans who desire flexibility. With the rise in remote work earlier on, renting offered an attractive option for those looking to explore living in relatively affordable markets further from big tech cities. Now that for-sale home prices and mortgage rates are climbing, many would-be buyers are turning to renting and driving up rental prices. In March, rents grew nearly four-times faster year-over-year (+17.0%) than in March 2020 (+4.3%).
With demand for more living space rising during COVID, rental prices for two-bedroom (+21.9%) and one-bedroom (+17.9%) units increased at the fastest rates from March 2020-2022. Studio rents, which experienced the biggest rental declines at the onset of COVID, posted relatively smaller two-year gains (+12.6%) in March. However, studio rents are quickly making up lost ground, posting the highest annual rental price gains among unit sizes for the third consecutive month in March.
Pandemic drives some redistribution of the fastest-growing rental markets
Among the 50 largest U.S. metros, COVID rental trends indicate some redistribution of high rents from the biggest tech cities to relatively more affordable metros outside of major downtowns. In March, big tech cities accounted for none of the top 10 metros by highest two-year rent growth. Instead, this list was dominated by Sun Belt markets, led by Miami with an increase of 58.0% over March 2020 (see table below).
Additionally, big tech cities represented five of the 10 slowest-growing rental markets from March 2020-2022. Despite these setbacks, many major tech hubs continue to command some of the nation’s highest rents. Even San Jose, where rents remain largely unchanged from March 2020 levels (+0.1%), claimed the country’s highest median rent ($3,075). Still, March rental data signals some final opportunities for renters to find savings in major metros like San Francisco, where rents for studios (-13.0%) and one-beds (-3.3%) declined over March 2020.
“With booming employment and the growing back-to-office wave stoking demand, big rents are back in big tech cities. Still, our March data suggests select tech hubs like San Francisco might still offer bargains on studios relative to pre-COVID rents. And for some, such as Gen Zers striking out on their own, even small rental savings could make a large difference,” said George Ratiu, Realtor.com® Senior Economist & Manager of Economic Research. “Regardless of your stage of life, with rising prices taking a bigger bite out of paychecks, it’s important to stay focused on financial health by keeping rental costs to a smaller percentage of your take-home pay. A tool like the Realtor.com® Rental App can help you customize your search and get alerts about newly-listed rentals in your budget.”