In July, the rental occupancy in the US hit 97%. Landlords are now able to flex unprecedented pricing power.
Biggest Wave of Tenants & Largest-Ever Rent Increases
Surging rental demand resulted in the biggest annual increase in tenants (+.5M) since 1993, according to RealPage.
In Q2 2021, rental occupancy hit 96.5% and in July, occupancy rates hit +97%, the highest surge in rentals on record.
With this rental stampede, tenants who signed new leases in July paid +17% more than the prior renter. Even people renewing their leases are getting sticker shock. One renter in Tampa gave notice to her landlord after learning that her two-bedroom unit for which she had been paying $1.479/month would now cost her an additional $300/month or $1,779/month.
The problem? This renter had nowhere to move because the 5 apartment complexes she visited had no units. She wound up paying $1,900/month at the sixth apartment complex she visited for the last available unit in that building.
Why this Rental Stampede?
There are several reasons lots of people are searching for rentals. Many people delayed moves during the pandemic lockdowns. Suburban home prices are skyrocketing and people who would like backyards and more space simply can’t afford the ticket prices for down payments.
Remember that some renters, particularly remote workers, are high earners who would have been able to become homeowners but are now precluded from owning by too high prices. Even these high-earning remote workers are searching for lower rent markets which will eventually push up those rental prices as well.
The average income of new lease signers in July hit a record-high of $69,252. Renters will need that income with rents increasing +16.5% in Phoenix and 12.9% in Las Vegas, according to CoreLogic.
Wall Street Noticing
Check out some of these well-known names who are keen on tapping into rental action:
- Jones Lang LaSalle REIT is taking a stake in a $1.2B portfolio of more than 4,000 rental properties
- Sam Zell, also know as the “Grave Dancer,” is partnering up with Toll Brothers to spend $1.9B to develop rental properties in metro areas across the US
- KKR & Co. is forming a new single-family-home landlord
- Greystar Real Estate Partners are almost ready to buy Fizzy Living, a London rental housing business
Landlords Jacking Up Prices at Record Speeds
Just as in home sales. landlords from Tampa, FL to Memphis TN to Riverside CA are jacking up rents at record speeds while leases are signed in hours.
Mark Zandi, chief economist with Moody’s Analytics, said, “The entire housing market is on fire, across the board from homeownership to rental, from high-end to low-end, from coast to coast. (Housing) is a basic need but it’s increasingly out of reach.”
Zandi estimates the country’s shortage of affordable rentals is the worst since post-World War II. Zandi also believes soaring rental costs are also a contributor to the Federal Reserve’s inflation expectations.
Thanks to Bloomberg and BusinessWeek.
