Apartment Rents Reach Highest Level in Two Years

With vaccinations increasing, the rental market is taking off.

Monthly rents jumped 5.5% year-over-year to an average of $1,527 in May, according to the Realtor.com Monthly Rental Report.

By comparison, before the onset of COVID in March 2020, rents were rising at 3.2%. Rents in studio apartments rose for the first time in ten months to hit a median rent price of $1,254, while one-bedroom and two-bedroom rentals reached the highest levels since March 2019, at $1,718 and $1,422, respectively in May. Two-bedroom rates jumped an average of 8% year-over-year, while one-bedroom rents increased 5.8% year-over-year.

“Led by emerging tech markets and secondary cities, US median rent prices reached the highest level seen in more than two years in May, surpassing pre-COVID levels,” Realtor.com chief economist Danielle Hale said in prepared remarks.

The recovery was widespread. In 38 of the 50 largest metros, rents hit new peak prices. Rents rose at an average pace of 9.1% year-over-year in May in those 38 markets.

One pattern from the pandemic continued as smaller tech cities and suburbs led the growth. Among the markets with more than 15% gains year-over-year in May were Riverside, Calif., Memphis, Tenn., Tampa, Fla., Phoenix, and Sacramento, Calif. While Riverside jumped 19.2% year-over-year to $2,020, it still was a better bargain than nearby Los Angeles, where the median rent was $2,581.

In the nation’s ten largest tech cities, rents declined only 2.3% in May. That was an improvement over the 6.6% decline earlier this year. Austin, Texas, and Denver stood out, posting increases of 6.4% and 5.5% in May, respectively. One particular advantage for Denver during the pandemic is that it is considered one of the most attractive markets for teleworkers in the country. 

The big cities battered by the COVID shutdowns, specifically New York and San Francisco, still need to see rents grow an additional 9 to 12% to return to prior peak pricing. Year-over-year rents fell 8.3% in San Francisco and 7.3% in San Jose. They were flat in New York.

Hale says some big cities, including San Jose, are making strides to recovery.

Other reports also show issues in San Jose and California markets. The May report from Apartment Guide has found that San Francisco, Oakland, Los Angeles and San Jose all rank among the top US cities with the biggest fall in one-bedroom rental rates. San Francisco and Los Angeles lead the nation in rent decreases.

Affordability seems to play a key role. All of the California cities with falling apartment rents also double as some of the most expensive markets in the country. “While prices in California are decreasing, it is still one of the most expensive areas in the country for renters,” Brian Carberry of Apartment Guide, told GlobeSt.com in a previous interview. “I think the demand in California for renters has decreased in these areas as people are realizing that more affordable options can be found outside of the major cities or even in neighboring states.”