Published by Bloomberg | August 18, 2021
The dramatic conditions for U.S. homebuyers during the past year are now spilling into the market for rentals.
Soaring prices. Competition. Desperation. The dramatic conditions for U.S. homebuyers during the past year are now spilling into the market for rentals.
Landlords from Tampa, Florida, to Memphis, Tennessee, and Riverside, California, are jacking up rents at record speeds. For each listing, multiple people apply. Some renters are forced to check into hotels while they hunt after losing out too many times.
“Any desirable rental is going within hours, just like the desirable sales,” said Shannon Dopkins, a Realtor in Tampa. “One woman passed on a place that was beat up with water damage. Somebody else decided to rent it.”
After weakening early in the pandemic as the economy faltered and young people rode out lockdowns with family, the rental market is now seeing record demand. The number of occupied U.S. rental-apartment units jumped by about half a million in the second quarter, the biggest annual increase in data going back to 1993, according to industry consultant RealPage Inc. Occupancy last month hit a new high of 96.9%.
Rents on newly signed leases surged 17% in July when compared to what the prior tenant paid, reaching the highest level on record, according to RealPage.
The gains reflect competition for a resource that’s getting ever-more difficult to obtain: somewhere to live. With prices soaring in the for-sale market, and bidding wars proliferating, would-be buyers on the losing end are being forced back into rentals.
At the same time, young Americans looking for their first apartment are competing with others who delayed plans because of Covid-19. Remote workers — and their high paychecks — are on the move to lower-cost areas. And small single-family home and condo landlords, tempted by high prices, are cashing out, leaving their tenants desperate for another place.
“The entire housing market is on fire, across the board from homeownership to rental, from high-end to low-end, from coast to coast,” said Mark Zandi, chief economist for Moody’s Analytics. “It’s a basic need but it’s increasingly out of reach.”
Eviction bans also are playing a role in keeping the market tight, because about 6% of tenants are normally forced to vacate each year. Zandi estimates the country’s shortage of affordable rentals is the worst since at least the post-World War II period.
Developers are adding new supply. But in the short run, the squeeze will have economic consequences because workers can’t easily move for jobs and will have less to spend on things other than housing. Soaring rental costs also are a contributor to the Federal Reserve’s inflation expectations.