Rent hikes plus rental bidding wars have jacked up rents to new highs.
Largest Monthly Gain in Rents Since 1987
According to the Bureau of Labor Statistics, the seasonally adjustable index for rent in the US increased 0.6% from January to February, the largest month-to-month gain since 1987.
Without any adjustments, renters are paying more for rent this year than they paid last year, a hefty +4.2% y/y more.
“There’s still further (rent increase) strength to be seen,” said Wells Fargo senior economist Sarah House. “We don’t expect (rent increases) to peak until maybe the third quarter.”
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Nationwide Rent Increases Across Major Markets
Rents hit a record average of $3,700 in February, according to a report by the appraisal firm Miller Samuel for Douglas Elliman. This record figure of $3,700 was just the headline for rentals. Units averaged only 24 days on the market and renters had a one-in-five chance of facing a bidding war.
San Francisco Bay Are rents rebounded to nearly pre-pandemic levels in February. Coming back from the most pandemic-pummeled rental markets in the nation, San Francisco rents increased +16% y/y and San Mateo rents increased +17% y/y in February.
The highest rent gains in the country during February happened in Miami. With an increase of +31% in 2021, Miami’s rental market is now one of the least affordable markets in the country.
Record Share of Americans Expect Rents to Rise
According to Zumper’s National Rent Index which tracks the top 100 rental markets across the country, median one-bedroom rents posted an all-time high in February, the ninth time in the last 10 months of record-setting rent gains. (Because renters see a change in their rents when leases are renewed or when renters move to a new place, long-term renters haven’t yet seen the worst of asking rental prices yet.)
According to Fannie Mae’s monthly February survey, 69% of respondents believe rental prices will rise by +7.1% during 2022.
The Federal Reserve Bank of San Francisco wrote in an economic brief in February that “Persistent increases in asking rents will eventually push up the average rent of the entire (rental) stock of units on the market.”
Consumers’ perceptions on rent price increases are also seen as harbingers of home price increases for the year, according to Fannie Mae, as more consumers anticipate higher home prices and higher mortgage rates in 2022.
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