Rent Growth Gone by Way of Fading Pandemic

Knock on wood, pandemic fears are basically over, and so are some of COVID-19’s apartment rent growth trends, according to a new report from Zumper.

The drive of prospective renters seeking homes in the Sun Belt region due to work-from-home policies is no more, a reversal especially evident across Arizona.

Nationally, the median price for a one-bedroom is flat over last month; the two-bedroom median fell 0.4%. Nearly half the cities on Zumper’s list posted decreased or flat one-bedroom prices compared to last month; the two-bedroom median is down or flat in 60% of our top 100 cities.

Tulsa, which previously saw big price hikes thanks to an incentive program to lure remote workers, is down a whopping 6.3% over last month.

Household Formation Has Paused, or Inverted

Zumper CEO Anthemos Georgiades, said in prepared remarks, “We’re seeing pandemic trends begin to unwind, and unwind quickly, as renters hunker down in anticipation of a recession.

“Over the last two years we saw unprecedented rises in rent prices driven by a booming economy, low interest rates, a one-off spike in demand post vaccines, and supply chain issues that delayed new units coming to market.

“Now—with inflation and interest rates high and the labor market beginning to tighten—Americans are holding off on major economic decisions. Household formation has paused and even inverted, driving demand down and cooling off rent prices.”

Several metros accustomed to substantial, sustained price increases are beginning to level off: Median one-bedroom rent is down in Nashville (2.9%), in Boston (2%) and in New York City (1.8%).

Household Formation Could Cut by Half

Housing economist Tom Lawler recently said, as shared in the Calculated Risk blog, that “there is strong reason to believe that household growth is no longer getting the ‘boost’ from behavioral changes as suggested from March 2021 to March 2022.

“If that turns out to be true, then household growth is or will return to growth more consistent with underlying population changes by age group, a development that would imply household growth over the next year of about half that apparently experienced from early 2021 to early 2022.

“Such a dramatic shift has major implications for projections of rent growth and home price growth next year.”