Slipping Rent Growth Expected to Make Full Recovery Next Year

November marked a recovery for rent appreciation following a long slide that began in February, according to Zillow’s newest market report, which predicts that rent growth will take back its losses in 2021.

“With a vaccine on the horizon and Gen Z continuing to graduate from college, we expect the cloud of uncertainty surrounding the pandemic to lift and demand for rental units to surge in 2021,” said Zillow senior economist Chris Glynn.

The typical US rent was up 1.1% year-over-year in November to $1,734, after slipping from 3.9% growth in February to just 0.7% growth in October, Zillow reported.

Among the 100 largest US markets, monthly rent growth was highest in Stamford, CT (3.1%), Providence, RI (2.3%) and Ogden, UT (2.1%). In suburban cities, rents have rebounded quickly and are 0.5% higher today than at the start of the year, according to the Apartment List.

Because renters felt the most pain from the pandemic and resulting recession, November rents are in roughly the same place as at the beginning of the year. In fact, rents have posted a mere $4 increase since January, says Zillow.

However, that pain seems to be easing ever so slightly. For the first time since the downturn began, Gen Z renters began venturing back out in search of good deals. But due to vaccine euphoria, a rental market rebound may make those limited-time offers.

Meanwhile, the for-sale market continues at full throttle.

Zillow economists expect 5.7 million homes to be sold by the end of the year, which is 5.9% more than were sold in 2019. Zillow’s typical home value rose 1.1% from October to November and 3% during the past three months, both of which are the largest gains on record going back to 1996. The rapid acceleration in US home values is driven by strong demand and diminishing inventory, the same forces that established this sellers’ market after a short spring lull.

Next year is forecasted to be much stronger. In 2021, Zillow economists expect home values to increase by 3.6% in the three months ending February 2021 and by 10.3% from November 2020 to November 2021.

And, with 6.9 million homes expected to be sold, 2021 is poised to be the strongest year since 2005, at 21.9% more than 2020.

“We expect the housing market to continue its bull run from this summer and fall, well into 2021,” said Jeff Tucker, Zillow senior economist. “This rapid price growth will be driven by the same factors that took the steering wheel in 2020: strong demographic trends, shifts in buyer preferences sparked by the pandemic, low mortgage rates and short supply. The Millennial generation is moving into their mid-30s and bringing a wave of demand from renters looking to buy their first homes.”