Rising and Falling Rent Rates Across the US
COVID-19 has forced landlords across the US to offer incentives to attract tenants who have moved away from urban areas. In August 2020, the median US rent was $1,771, down 0.3% from the previous month. According to Zillow, this is the largest monthly decrease since September 2017.
Rents Are Falling Low, Low, Low
Since the start of the pandemic, year-over-year increases in rent have slowed every month — down from a February rent increase of 3.8% to just 0.7% in August.
Big cities like New York and San Francisco were hit hard and forced millions of unemployed Americans to move back in with their families. Remote workers turned their sights on homes in the suburbs, further driving down demand for lease in cities.
Top cities have seen big rent decreases:
- New York: 4.6% decrease to a median of $2,716
- San Francisco: 4% decrease to a median of $3,167
- Boston: 2.8% decrease to a median of $2,490
Other big cities, like Chicago, Austin, Houston and Denver, have also seen rent rates decline.
The Mass Exodus From Big Cities
The COVID-19 pandemic has put a serious strain on Americans, especially those who have become unemployed.
According to a recent Pew Research Center survey, 16% of Americans have had problems paying rent/mortgage since the coronavirus outbreak started in February. Among lower income Americans, 32% have struggled to make rent or mortgage payments.
One in four US adults said they or someone in their household was laid off or lost their job due to COVID-19, with 15% saying this happened to them personally. Lower-income adults and young adults (ages 18 to 29) were most likely to have been laid off.
As a result of these economic hardships, many recent graduates are abandoning their goals of moving to a big city and applying for their dream job. Many are being forced to move back in with their families, further driving down demand for rented housing in big cities.
The Rare Exceptions
On the other hand, cities that have reopened and regained a sense of normalcy have had rent prices stabilize and even rise:
- Memphis, TN: 8.3% increase in rent
- Phoenix, AZ: 5.7%
- Riverside, CA: 5.5%
- Indianapolis, IN: 4.8%
- Columbus, OH: 4.6%
Making Concessions
In an attempt to lure back tenants, many landlords are offering concessions on listings. According to Zillow, concessions have nearly doubled from 16.2% in February to 30.4% in July. Only 12.5% of rental properties offered concessions in July 2019. This is a leading indicator of an impending price drop.
The share of all rental concessions offered in 50 metro areas from February to July:
- Free rent: 90.8%
- Waived or reduced deposit: 9.1%
- Gift card: 6.6%
- Free parking: 2.3%
- Waived application fee: 0.6%
- Waived broker fees: 0.1%
Free rent ranged from a few weeks to two months, with a median of six weeks. This equates to an 11.5% annual discount, or a $200 monthly savings. Free rent was the top concession offered in 44 of the largest US markets.
Many landlords in Manhattan are offering a variety of perks, such as promising to:
- Install new appliances, such as refrigerators, dishwashers and laundry machines
- Upgrade closets to tenants’ specifications
- Add a fresh coat of paint
Bill Kowalczuk, a broker at Warburg Realty in New York City, says “Until companies start forcing employees to work in the office and people come back to Manhattan as their primary residence, we could see high inventory for a while.”
Closing Thoughts
QuickDraw Fund Control wanted to share these important trends with you to consider for your current and future projects. Please feel free to contact us with any questions.