After months of soaring rents as housing markets in densely populated cities recovered from the pandemic, which prompted millions of Americans to flee (at least temporarily) to suburbs or exurban places (while younger members of the workforce returned to the basements of their parents to seek refugee and conserve resources), the latest reading from the Apartment List National Rent Report showed national rents increased by just 0.8% between September and October.
That's the lowest month-over-month reading since February, when the pace of rent growth has slowed down significantly from its July peak. Still, the rate at which rents are rising still outpaces pre-pandemic trends.
Still, since January of this year, the national median rent has increased by a staggering 16.4%, mirroring a surge in home prices.
To try and put that into context: rent growth between January and October increased just 3.2% on average during 2017, 2018 and 2019, the three years prior to the pandemic.
Back in August we were talking about rental hyperinflation and the threat it poses to workers whose earnings aren't rising nearly as fast as inflation.
But the fact that national rent growth has cooled - an indicator coming just days after Zillow announced it might take a massive loss as it scrambles to sell its inventory of 7K homes for $2.8 billion, the latest sign that the "iBuyer" business might be the first victim of the surge in housing prices post-COVID - might have broader lessons for the housing market.
To be sure, rents are still rising; they grew by 0.8% this month, but the rate of growth slowed for the third straight month after peaking at 26% in July.
In an attempt to illustrate how the pace of rent increases has been impacted by the pandemic, Apartment List shared its model for the pace of rents in 2020 and 2021 if the pandemic had never happened.
But right now, it looks like Americans' (and investors') appetite for buying homes is running out of steam. e pace of rent growth is cooling in 95 of America's largest cities. As the dark red bands on the right side of the chart depict this year’s rent boom, the final column also shows how the pace of increases has cooled over the past month.
95 of the 100 largest cities in the US saw slower rent growth this month compared to last. But there's one place where rent appreciation is still accelerating at a pretty strong pace: Florida.
Apartment List's takeaway is this: Although the pandemic created some softness in the rental market last year, 2021 has brought the fastest rent growth we have on record in our data as rents in cities like NYC bounced back and cities like Boise and other small cities have seen an influx of residents.
Nationally, and in nearly all individual cities across the country, rent growth in 2021 has exceeded average growth rates from pre-pandemic years. This month however, that record-setting growth is finally showing signs of a meaningful slowdown.
What do impact do you think that will have on the housing market?