Rental Prices Soar to New Heights as Pandemic Drags On
omebuyers aren’t the only ones having a tough time in the housing market. Rental prices that remained flat during the pandemic are now soaring as landlords are raising rents while desperate tenants offering to pay extra are pushing prices even higher.
For the first time on record, rental price growth rose by double digits, increasing 11.5% year over year to a median $1,633 in August, according to a recent Realtor.com® report. That’s three times the growth seen before COVID-19 struck in March 2020.
Rental prices are now rising faster than the prices for homes for sale. (Median home list prices rose 8.6% in August, according to Realtor.com.)
And the increases come just as many eviction moratoriums around the nation are ending. Those signing a lease these days are paying an additional $169 a month compared with last year—at a time when many people are still struggling to get back on their feet after suffering job losses during the pandemic.
“Higher rents reflect strong demand, as some prospective homebuyers have postponed their home searches and signed a lease instead,” says Realtor.com Chief Economist Danielle Hale.
Only a handful of the largest cities—New York, Boston, San Francisco, and San Jose, CA—which were hammered during the pandemic as residents who could work from home left for cheaper parts of the country, have yet to reach peak rents.
“But they’re catching up, and several may be on pace to see new highs in rents in the months ahead,” adds Hale.
In August, rent increases were highest for two-bedroom apartments, with the median rent reaching $1,828 nationally, $200 higher than the previous year. One-bedrooms also saw double-digit growth in August, to $1,524 a month, an increase of 14.3% over last year. Studios were close behind: The median rent nationally was $1,338, an increase of 8.3 %.
Rental prices in Tampa, FL, rose the most nationally—shooting up 30.6% year over year in August. The median rent hit $1,760 in August.
Other cities where rents rose by more than 25% in a single year included Riverside, CA, Miami, and Phoenix.
Affordable prices, sunny weather, and a tax-friendly climate are attracting renters and homebuyers to Tampa Bay and other Florida markets, says Hale. Growth in housing is being driven by buyers and renters from outside the area, particularly those who were able to work remotely during the pandemic.
More than 63% of home shoppers in the Tampa area are from out of town, says Hale. Nearly 1 in 10 came from New York or Miami.
Tampa’s rental prices are being driven by the city’s housing shortage, says Brad O’Connor, chief economist of the Florida Realtors Association in Orlando. While the shortage has begun to ease, “we’re still not able to keep up with the level of demand—especially for starter homes,” he adds.
He predicts high rents will remain in Tampa for at least a year.
“The pandemic resulted in a one-time large increase in savings, and this is an echo effect of that,” he says. This means some prospective tenants can afford the bigger housing bills, at least for the moment. But he doesn’t anticipate prices will keep rising at these levels for long. “I don’t think further rent increases are sustainable.”
By Donna Jackel for Realtor.com