Spurred by rising mortgage costs, December’s average monthly apartment rent grew to $1,877, a 14.1% increase from the previous year and the largest annual jump since February 2019, according to a new Redfin report.
Mortgage payments also saw double-digit percentage growth last month. Nationally, monthly mortgage payments grew 21.6% from the previous year, another record increase.
Redfin chief economist Daryl Fairweather said the growth in mortgage payments has been driven up by rising prices and rising mortgage rates.
“And those rising mortgage costs push more potential homebuyers into renting instead, which pushes up demand and prices for rentals,” he said in a press release. “Mortgage rate increases are accelerating, which will cause both mortgage payments and rent to grow throughout 2022.”
The average Boston apartment rent rose 22.3% in December year over year to $3,637, while the average mortgage payment in the Boston area grew 18.8% to $2,511.
The report found rents rose in more than 30% of major metros. And except in Austin, Texas, and Seattle, the top 10 areas with the fastest-growing rent year over year were all on the East Coast. Only Kansas City, Missouri, saw rents decline year over year, down just 0.8%.
Low inventory and high demand are causing Boston Beacon Hill apartments to be in high demand and even causing bidding wars in some cases.
Click to View Ford Realty Google Reviews
Updated: Boston Real Estate Blog 2022
Bidding wars are becoming so common that they’re even impacting the Beacon Hill apartment rental market, as numerous wannabee tenants vie for a dwindling supply of homes and apartments listed for rent.
Demand for rental properties is surging as workers begin moving out of their shared living situations as the U.S. reopens and gets back to work. Add to that, thousands of people who’re priced out of buying a home, and there’s suddenly a whole lot of people scrambling to try and rent a place.
Supply can’t keep up and now landlords are reporting having multiple applications on their best properties, with some even trying to stand out by offering to pay more than the asking rent. It’s a situation that was only ever really seen in the home buying market, CNBC reported.
Another thing is that, with such stiff competition, renter’s profiles are changing as well, and people have more money and better credit histories than before.
With such intense competition for apartments, rents are rising fast too. According to Zumper, a listing platform for rentals, rental prices for one-bedroom apartments were up 7% in July from a year ago, while two-bedroom apartments were up 8.7%.
There is more demand in some markets than others, though. For example rent applications in New York City doubled this spring compared to the year prior. San Francisco saw rent applications jump 79%, while Seattle was up 55%, according to data from RentCafe. It was a different story in Boston though, where rental applications increased by just 5%.
As single-family home rentals, data from CoreLogic shows asking rents are up 6.6% from a year ago.
CoreLogic Principal Economist Molly Boesel said demand for single-family rentals is being fueled by strong job and income growth as well as the fierce competition for for-sale housing. She said rent prices will likely continue rising for the rest of the year, especially in cities and technology hubs where people are now returning to work at the office.
David Singelyn, chief executive officer of American Homes 4 Rent, told analysts in the company’s second quarter earnings call that data shows there’s a national shortage of more than four million homes in the U.S. The company has been reaping the rewards of that shortage, with strong occupancy and revenue growth helping it to beat expectations.
“[the shortage of homes] coupled with our single-family rental value proposition, provides the backdrop for continued long-term rental demand growth,” Singelyn said on the call earlier this month.
Other firms focused on apartment rentals have seen similar big gains of late. The likes of Avalon Bay, Essex Property Trust and UDR have all seen their stock grow 30% or more since the start of the year. The message from all three companies was the same – the urban flight we saw at the start of the COVID-19 pandemic is reversing and people are returning to the cities, sending rents soaring.
Experts say the new eviction moratorium put in place by the Centers for Disease Control and Prevention is another factor that’s pushing rental prices up. With landlords across the U.S. still unable to evict non-paying tenants, it means there are fewer rental homes available for those who can pay. Some landlords who haven’t been paid have looked to offset their losses from non-paying tenants by asking for more on the units that are vacant. With demand so high, they feel they can justify bumping up their rents.
Apartment Eviction Moratorium
“The eviction moratorium has caused hardship for landlords, and that couples with the fact the Rental Assistance Program has not actually kicked in, in the fashion it was intended to, has really caused a squeeze on both renters and their landlords,” he told CNBC.
Click Here to view: Google Ford Realty Inc Reviews
Click to View Google Review
They are usually reserved for homebuyers, but bidding wars are becoming more common in the rental home market.
In July, rents nationally rose 7% year over year for one-bedroom apartments and 8.7% for two-bedroom apartments. Single-family rentals are also experiencing a surge in demand.
To offset losses from the Covid eviction moratorium, some landlords are raising rents on the properties they can, knowing that demand in the market will support the increases.
They are usually reserved for homebuyers, but bidding wars are becoming more common in the rental home market. Demand for apartment and single-family rentals is surging and outpacing supply.
As the economy improves, workers are moving out of shared living situations and looking for their own homes. In addition, the housing market is so expensive right now that many would-be buyers are being priced out. That has them looking for rentals.
“We’ve been leasing property for almost 20 years, and we haven’t seen an applicant pool this competitive since we’ve started,” said Vipin Motwani, managing principal at Iron Gate Development in Maryland.
Motwani listed a Clinton, Maryland, home two weeks ago and had 20 prospective tenants go through it. He then received 10 applications, far more than normal. Given the stiff competition, renter profiles are now changing as well. Meaning, they have more money and better credit histories.
“The rental applications that we’re getting right now, you’re seeing higher credit scores, you’re seeing applicants willing to put down more in terms of security deposit, you’re seeing strong rental history as well. That wasn’t necessarily the case pre-Covid,” Motwani said.
Matt Van Slyke moved to New York City this weekend to start a new job. He toured about 15 apartments in two days after searching on apps like StreetEasy. He saw prices of the units he was looking at go up $300 to $400 just over the last two to three months.
He didn’t get it. And it was the one he really wanted.
Van Slyke then tried for another one that already had multiple applications and lost out on that one as well. He eventually settled for something pricier than he would have liked, a studio in Manhattan’s East Village, he said, since he felt a “time crunch” because of his job and “it just seemed like everything else was flying off the shelves.”
The rental applications that we’re getting right now, you’re seeing higher credit scores, you’re seeing applicants willing to put down more in terms of security deposit, you’re seeing strong rental history as well. That wasn’t necessarily the case pre-Covid.
The intensifying competition is driving rents higher at a strong pace.
In July, rents nationally rose 7% year over year for one-bedroom apartments and 8.7% for two-bedroom apartments. That is up from 5% and 6.5% annual gains in June, according to Zumper, a national rental listing platform.
Some markets are seeing more demand than others. In the spring of this year, New York City saw its rent applications double compared with 2020, San Francisco saw a 79% increase in prospective renters, and Seattle experienced a 55% jump, according to RentCafe, a rental listing website. Meanwhile Boston saw only a 5% gain, while rent applications rose 8% in Charlotte, North Carolina, and 9% in Portland, Oregon.
For single-family rental homes, the latest read from Corelogic in May showed rents up 6.6% year over year, which is nearly four times the annual increase seen in May 2020.
“Strong job and income growth, as well as fierce competition for for-sale housing, is fueling demand for single-family rentals,” Molly Boesel, principal economist at CoreLogic, said in a release. Boesel said she expects these factors to continue to drive the market this year, especially in and around cities and technology hubs as people start to return to offices.
Rental demand pushed American Homes 4 Rent’s results beyond expectations, CEO David Singelyn said in a recent call with analysts.
“Today, the national housing shortage sits at more than 4 million homes,” he said. “This coupled with our single-family rental value proposition provides the backdrop for continued long-term rental demand growth.”
Apartment REIT stocks are also seeing big gains. Names like Avalon Bay, UDR and Essex Property Trust are all up over 30% year to date. The flight from urban areas is reversing. Occupancy and rents for city properties are rising.
The coronavirus pandemic eviction moratorium, recently extended, is also playing into the supply situation. As some landlords are unable to evict tenants who aren’t paying, they have less supply to offer those who can pay. To offset losses, some are raising rents on the properties they can, knowing that demand in the market will support the increases.
Motwani has had several tenants unable to pay and said he has lost about $30,000 so far during the pandemic.
“The eviction moratorium has caused hardship for landlords, that coupled with the fact that the Rental Assistance Program has not actually kicked in, in the fashion that it was normally intended to has really caused a squeeze on both renters and their landlords,” said Motwani.
Source: CNBC Real Estate
Updated: Boston Real Estate 2021