Plummeting Coastal Apartment Rents May Have Reached Bottom

In a sign that rental markets may be stabilizing in the wake of COVID-19, apartment rents registered their first—albeit small—increase since August, with Apartment List’s national index ticking up a modest 0.1% from December to January. The uptick signals a potential turning point in the trends driving explosive pandemic-era growth in more affordable midsize cities. 

Rents are now down by 1.2% year-over-year, a slight increase from the 1.5% year-over-year decline Apartment List  reported in January. But while rents have declined by 1.1% over the past six months—a number consistent with prior years—there’s significant regional variation beneath the surface. Rents remained in freefall in certain markets in recent months, while others saw demand boosted as COVID-19 disrupted migration patterns and pushed many urban workers to secondary markets.  The February data, however, shows that local fluctuations may be flattening. 

“Although the data continue to show significant regional variation, the markets that have been most heavily impacted by the pandemic are beginning to enter calmer waters,” the report states. “In the pricey coastal metros where rents have been plummeting, this month’s data implies that we may have reached the bottom. At the other end of the spectrum, many of the mid-sized markets that have seen rents grow rapidly through the pandemic have seen just modest increases this month.”

Rents in San Francisco, for example, are down 27% year-over-year, and Apartment List predicts that the city may be close to the bottom of its price correction, as rents fell by just 0.4% in January. Similar trends are playing out in markets like New York City, where rents declined by 0.6% this month compared to an average monthly decrease of 2.4% since the onset of the pandemic.  Boston and San Jose also both saw positive rent growth, with upticks of 0.4% and 0.1%, respectively. 

While pricey coastal cities saw rents decline, a group of mid-sized markets experienced major increases fueled by tightening supply and low vacancies, though the growth may now be flattening out.  Boise leads the way, with rents up 12.4% year-over-year, followed by Chesapeake, Va., which saw an increase of 8.4% during the same period. 

“Growth shows signs of leveling off at both ends of the spectrum,” the report states. “While remote work and economic fallout of the pandemic will undoubtedly continue to impact local rental markets going forward, the way that these trends continue to play may now start to become more nuanced and gradual.”