Rents set to continue upwards in the US, led by tech hubs in the West
Residential rents across the United States are forecasted to rise 1.7% over the next year, the same rate of appreciation as the past 12 months, according to the latest real estate analysis report.
Rents will rise in 34 of the 35 largest US metros, although 11 of the 35 are expected to report slower growth, says the report from real estate firm Zillow.
Seattle and Portland are expected to see rents rise the most over the next year at 7.2% and 6% growth, respectively, outpacing San Jose and San Francisco rents, with technology jobs driving much of the growth.
The report also forecasts that Denver, San Francisco and San Jose are likely to see rent appreciation of more than 4% as fast rising rents in the West continue a trend that’s been happening over the past several years.
Seattle, Portland and Sacramento reported the fastest rent appreciation over the past 12 months. Last year, Miami and Boston were among the 10 fastest growing rental markets, but over the next year San Jose and Cincinnati will replace them on the roster of the 10 fastest growing rental markets. Cincinnati is the only Midwestern metro to make the list.
Job opportunities and high salaries are drawing people to tech centres like Seattle and San Francisco, but the demand for a limited number of rental units available continues to drive up costs. Rents in these areas have been growing rapidly over the past year, with Seattle reporting the fastest growth at almost 10%.
‘High rent growth in these markets is being driven by high demand and low supply. We have more renters today than in the past and most newly formed households are renter households,’ said Zillow chief economist Svenja Gudell.
‘This taken together with a lack of new rental construction at less expensive price points has been a recipe for rising rents. There is good news for renters on the horizon, though. Current renters in these markets can expect rents to slow down a bit over the next year,’ she pointed out.
‘Instead of the 10% rental appreciation we’ve been seeing in some places, expect growth more along the lines of 4% to 7%. This is still high, but will hopefully give renters some relief,’ she added.
Seattle tops the forecast table with rental growth of 7.2% over the next year, followed by Portland at 6%, Denver 5.9%, Cincinnati 5.2%, San Francisco 4.9%, Los Angeles 4.8%, Sacramento and San Diego 4.7%, Phoenix 4.6% and San Jose 4.5%.
Median rent across the US is forecasted to appreciate just 1.7% over the next year, which is consistent with growth experienced over the past 12 months but a substantial slowdown from the 6% rent appreciation reported at this time last year.