Double-Digit Monthly Rent Growth Becoming a Trend

Nationally, apartment rents grew at a double-digit annual pace (+13.6%) for the second month in a row, spurred this time by big-city demand, according to the Realtor.com Monthly Rental Report.

The report reflects rental data as of September 2021 for units advertised as for-rent on Realtor.com.

Following sharp declines during the pandemic, September data shows rents in the 10 biggest US tech cities such as Austin and New York surpassed March 2020 levels by an average of 6.3%.

“With rents continuing to surge to new highs nationwide, including in big tech hubs, September data confirms the US  rental market has moved past the recovery phase and is fully back in business,” George Ratiu, Manager of Economic Research for Realtor.com said in prepared remarks. 

“Rental demand remains unseasonably high, driven by still-limited housing supply, rising mortgage rates pushing buyers towards renting, and more people returning to big cities. At the same time, it’s important to put recent rental activity in the context of housing trends throughout the pandemic. Rents didn’t rebound from COVID declines as quickly as for-sale home prices, but rental activity has now reached a level not unlike the homebuying frenzy seen earlier this year, before fall seasonality kicked in.

“The good news is that if rents continue to parallel home listing prices, rental price growth could potentially begin cooling this winter.”

Big-City Rents Making Up for Lost Time

While big city rents dropped or stalled during the pandemic as people fled to less expensive and crowded areas, large urban rental markets began to rebound in April 2021 with the rollout of vaccines. 

However, rent growth in these major metros has found its stride over the past two months, with September data showing big city rents have not only recovered but are making up for lost time. In most counties at the heart of the nation’s 10 biggest tech cities, the September rental growth rate was higher than in March 2020, before the onset of COVID.

The average rent across the 10 biggest US tech cities grew by 9.9% year-over-year in September and was 6.3% higher than in March 2020. For comparison, average big tech metro rents declined by as much as 7.2% at the height of the pandemic.

Some of the cities with September’s biggest annual rent gains, such as Austin (+22.3%) and Denver (+15.5%), did not necessarily experience the steepest COVID declines among big tech hubs during the pandemic.

However, rents are surging even in major metros that experienced some of the nation’s biggest COVID declines. For instance, Seattle rents were 8.1% higher in September compared to March 2020, bouncing back from declines of 12.3% at the city’s lowest point during the pandemic.

“The days of rental deals in metros like San Francisco and Manhattan may be over, but there is a silver lining for renters with more flexible timelines,” Raitu said. “Big city rental competition and high prices is a sign of normalcy, which could precede more seasonal norms like winter cooling in rent growth in parts of the US.

“For renters on tighter schedules, compromises will be key to staying on budget and not getting swept up in bidding wars.

September Suggests Return to Seasonality

September’s rent growth was faster than in a typical year, but month-over-month has been getting smaller since the summer. This suggests a return to seasonality may be on the horizon for this coming December or January.In September, the US median rental price reached a new high of $1,654, up 13.6% year-over-year.

Annual rent growth in September was four-times faster than in March 2020 (+3.2%), before the onset of COVID. National rents are now 15.5% ($222 per month) higher than in September 2019.

September’s national rent increase over 2020 was higher than in August (+11.5%), but month-over-month increases have been moderating from the feverish pace seen over the summer, up 3.2% from May to June.

In a typical pre-COVID year, rents have historically fluctuated by less than 1% on a monthly basis.