Apartment List National Rent Report

Apartment List ,  April 29, 2021

Introduction

Welcome to the May Apartment List National Rent Report. This month’s data shows rent rebounds accelerating in markets across the country. Our national index increased by 1.9 percent over the past month, the largest monthly increase ever in our estimates, going back to the beginning of 2017.

The data continue to exhibit significant regional variation, but the days of plummeting rents in pricey coastal markets are officially behind us. Although rents in San Francisco are still down 19.5 percent year-over-year, the city has seen prices increase by 7 percent over just the past two months. 9 of the 10 cities with the sharpest year-over-year declines have now had three consecutive months of rising rents. At the other end of the spectrum, many of the mid-sized markets that have seen rents grow rapidly through the pandemic are showing that there’s still steam left in the current boom – Boise rents jumped by another 5.2 percent this month, the biggest increase among the nation’s 100 largest cities.

National index shows largest monthly jump going back to 2017

Our national rent index is up by 1.9 percent month-over-month, the largest single month increase ever recorded in our estimates, which began January 2017. For comparison, in the pre-pandemic years of 2018 and 2019, month-over-month rent growth in March was 0.8 percent and 0.7 percent, respectively. This month’s sharp increase breaks a record set just last month, when rents jumped by 1.4 percent. In each of the past four months, our national index has not only had positive growth, but has outpaced the average growth of prior years. After the rapid growth of recent months, year-over-year rent growth now stands at 2.3 percent, in line with the rates from prior years.

In other words, the recent growth in our national index has now reversed the disruption experienced in the early stages of the pandemic. Rents fell by 1.2 percent nationally from March through June of 2020, during what is normally peak season for the rental market. But in the second half of 2020, national rent growth was largely in line with the seasonal trend that we’ve observed in prior years, and now our index is growing faster than the typical seasonal trend.

In markets like San Francisco where rents had been falling fastest, prices have turned a corner and are now rebounding. At the same time, booming markets like Boise continue to see prices climb. More broadly, as vaccine distribution continues to gain momentum, we may be starting to experience the release of pent up demand from renters who had been delaying moves due to the pandemic. Whereas last year’s peak moving season was halted by the pandemic, this year’s seasonal spike appears to be making up for lost time.

Rents in coastal superstar cities continuing a strong rebound

San Francisco consistently made headlines throughout the pandemic for the staggering 26.6 percent drop in rents from March 2020 through January 2021, but since January, San Francisco rents have increased by 8.5 percent. Although rents in San Francisco are still down by 19.5 percent year-over-year, the market has clearly turned a corner.

Beyond San Francisco, we’re seeing a similar trend playout in all of the cities where rents had been falling fastest. Nine of the ten cities with the sharpest year-over-year rent declines have now experienced positive rent growth for three consecutive months. Four of these cities – San Jose, Washington, D.C., Boston, and Minneapolis – have seen rents increasing for four consecutive months. The following chart shows month-over-month rent growth from 2018 to present for six of the cities that have been hit hardest by the pandemic:

In each of the panels in the chart above, we see three distinct phases:

1. 2018 and 2019 illustrate the typical seasonal price fluctuations of pre-pandemic years, with the bulk of annual rent growth occurring during the spring and summer, followed by modest declines during the fall and winter off-season.
2. With the start of the pandemic in 2020, we see a sharp break from the prior-year trend, with large month-over-month declines persisting throughout the year.
3. In 2021 we see a sharp rebound back to positive rent growth, with monthly increases larger than what was typical pre-pandemic.

In each of the six cities shown, the fastest single-month rent increase has taken place in 2021. Rents are still well below pre-COVID levels, and it’s possible that the steep upward trajectory could level out. But as of now, the rent rebound in pricey coastal superstar cities is happening sooner and more rapidly than we expected. Nowhere is the trend stronger than in Boston, where prices have increased 12.4 percent since the start of the near year, erasing more than half of the city’s pandemic rent decline.

Affordable mid-size markets continue to boom

As expensive coastal cities watched rents plummet throughout 2020, another group of mid-sized markets were heating up. The pandemic and remote work spurred demand for the space and affordability that these cities offered, and in response, rent prices grew even as the surrounding economy struggled. But while rent declines in expensive markets have reversed course, the cities where rents have been growing fastest are continuing to boom.

Leading the trend is Boise, ID, where rents grew by a staggering 5.2 percent over just the past month. This is the fastest month-over-month growth rate among the nation’s 100 largest cities, and Boise also continues to rank #1 for fastest year-over-year growth, which now stands at 22.7 percent. All of the 10 cities with the fastest year-over-year rent growth saw prices continue to increase this month.

Many of these markets had been heating up prior to the pandemic. For example, from January 2017 to January 2020, rents in Fresno increased by 22.6 percent, the nation’s third fastest growth over that period. Chandler, AZ ranked #6 for fastest rent growth from 2017 to 2020, and eight of the ten cities with the biggest pandemic booms were in the top 20 for pre-pandemic growth. The pandemic did not necessarily start a new trend in these markets, so much as accelerate an existing one. This stands in contrast to what has happened in the expensive markets discussed above, for which the rent declines of the past year were a complete aberration. Given this longer-term context, as well as the continued upward trajectory in rent trends, it seems that Boise and cities like it have yet to hit their peaks.

COVID shakeups have led to some convergence of expensive and affordable markets

As described above, affordability has been a key determinant of whether cities are experiencing falling or rising rents during the pandemic. The relationship is made more explicit in the chart below, which plots rent levels against rent changes for the 50 largest cities in our data. There is a clear correlation between the two; the cities that had the highest pre-pandemic rents in March 2020 (moving right along the x-axis) have seen the steepest rent drops since then (moving down along the y-axis).

Meanwhile, more affordable cities have tended to see prices climb. This has led to a certain degree of convergence in rent prices across the country – the most expensive markets have gotten somewhat more affordable, while the most affordable markets have grown pricier. For example, last March, the median 2-bedroom rent in San Francisco was $3,146, which was 3.4x the $929 median for a 2-bedroom in Boise. As of this month, the 2-bedroom median in San Francisco has dropped to $2,496, while in Boise it has grown to $1,144, meaning that rents in San Francisco are now just 2.2x those in Boise. While still a significant price difference, the affordability gap has narrowed substantially, and even as rents in San Francisco have rebounded in recent months, Boise has continued to grow even faster.

Conclusion

Since the start of the COVID-19 pandemic, we have witnessed significant disruptions to rental markets across the country. Social distancing and remote work changed what people want in a home, while many renters were thrust into immediate and unexpected financial hardship as layoffs and furloughs rippled through the economy. These sudden changes to budgets and preferences led to a convergence in rental prices across the U.S. – the most expensive markets saw rents fall rapidly while a number of more affordable mid-sized cities experienced accelerating rent growth. We are now seeing that the markets where rents had been falling sharply have turned a corner, and in some cases, prices in these cities have started to rebound rapidly. But although some may be moving back to superstar cities, affordable mid-sized markets are continuing to boom. As vaccine distribution continues to gain momentum, rental markets may be beginning to reflect the preferences of a post-COVID future.

For complete data, explore the interactive map below or head over to our rental data page, where you can download the most recent estimates for your city, as well as historic data going back to 2017. And as always, feel free to contact us with any questions!

To learn more about the data behind this article and what Apartment List has to offer, visit https://www.apartmentlist.com/.