Rent rises in the US pick up after a slow few months, with highest in California
Median rent across the United States increased by 2.4% in the 12 months to November 2017 to $1,435 per month, accelerating again after a few slower months, the latest index shows.
The growth was led by rent rises in the single family home sector with the fastest markets along the West Coast, according to Zillow’s November housing market report.
In Sacramento, California, median rents increased by 7.5% with Riverside and Seattle also see rents rise by over 5% while in Portland rents were up year on year by 4.6%.
The report says that with the recent pick up in rent prices, rent growth is now rising at the same pace as incomes for the first time since June 2016, causing renters to put more of their income toward a monthly rental payment. Incomes rose 2.5% year on year and have been hovering around that rate for over a year.
‘After about a two-year slowdown, rent growth is starting to pick back up across the nation. The slowdown in rental appreciation, combined with consistent income growth, gave renters some reprieve from worsening rental affordability over the past few years,’ said Zillow senior economist Aaron Terrazas.
‘But as rental growth begins to catch up with income growth, affordability will deteriorate, placing a squeeze on budget-constrained renters. Looking into 2018, rent is expected to continue gaining steam in growing employment centres, like Dallas and New York, as well as a few smaller markets like Cleveland,’ he pointed out.
‘More widespread rent growth could mean home buying demands stay high, as renters who can afford it move away from the unpredictability of rising rents toward the relative stability of a monthly mortgage payment instead,’ he added.
The Zillow report also shows that national home values are continuing to rise, but not as quickly as they have over the past several months. Over the past year home values rose 6.7%, the slowest rate of appreciation since November 2016, to a median home value of $205,100.
San Jose led home value growth with a rise of 17.5% year on year to a median value of $1,128,300, followed by rises of 14% in Las Vegas and 12% in Seattle.
Supply has fallen, down 10.5% compared to November 2016 with San Jose, San Francisco, and Denver reporting the greatest annual drop in inventory. Indeed, the data shows that there are almost 55% fewer homes on the market in San Jose than last year, some 30% less in San Francisco and 26.5% fewer in Denver.
Zillow also points out that mortgage rates moved in a very tight range throughout the month of November, reflecting stable financial markets and a predictable monetary policy outlook, despite looming leadership changes at the Federal Reserve.
Mortgages rates on Zillow started and ended the month of November at 3.7% which was also the month high and hit a low of 3.68% in the first week of the month.