Residential rents are rising at a faster rate in over three quarters of the largest housing markets in the United States than they did a year ago, new data shows.
The steepest annual growth is in Pittsburgh, Detroit and Houston while rents are growing more slowly in the priciest rental markets, according to the latest real estate market report from property firm Zillow.
Rents in all three locations were falling at this time last year but they have now rise by over 1% year on year. But in high rent areas such as Seattle, rents which were growing at 5.8% year on year in 2017 have now fallen back to 3.3%. A similar trend has been detected in Los Angeles, Portland and Boston.
Across the US rent growth has been holding steady at about a 2% to 3% year on year for the last 11 months but rose 2.1% over the past year to $1,440 per month.
The report points out that saving enough money for a down payment is one of the greatest hurdles to home ownership, and rising rents is one of the main reasons why saving is so difficult. Even in markets where rent growth is slowing, high prices have already been established. With mortgage rates rising and mortgage affordability deteriorating, owning a home may start to feel out of reach for many Americans, it warns.
‘Over the past two years, rent growth slowed across the country as new apartments hit the market and renters with the financial means to do so increasingly became home owners,’ said Aaron Terrazas, Zillow senior economist.
‘The slowdown in rent growth was most prominent in the markets that moved most quickly to add units, either because it was easy to build or because of local demands. But the ever swinging pendulum is again on the move. This spring rent appreciation has perked back up nationwide, though it remains well within a long term sustainable range,’ he explained.
‘The ebb and flow of supply and demand is following slightly different timeliness in different markets, but over the past two years, we have seen similar trends in markets from the Southeast to the Northwest,’ he added.
The report also shows that property prices are rising the fastest in San Jose, Las Vegas and Seattle while overall values are up 8% in the last year to a median price of $216,000. The median home value in San Jose is now $1,265,300, up almost 26% since May 2017 and prices rose 15.5% in Las Vegas and 12% in Seattle.
At the same time there are fewer homes available to buy with supply down by 5.3%, although the pace of inventory declines has been slowing for the past 10 months. Markets with the greatest drop in inventory are Denver, Atlanta and Pittsburgh. Buyers in Denver and Atlanta have 15% fewer homes to choose from than a year ago, and 13% fewer in Pittsburgh.
