Apartment Rents Move Beyond Pre-Pandemic Levels

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Rents grew 9.2% year-over-year in July, pushing beyond pre-pandemic levels, according to the July 2021 Zillow Real Estate Market Report.

The monthly increase in the Zillow Observed Rent Index (ZORI) was the fastest observed by Zillow, which has been tracking data since 2015. In addition, Zillow estimates that the US ZORI in July was 2.9% ($52) higher than where it would have been if the last roughly 18 months had been more ‘normal.’

In June, rents recovered from a difference of -3% (-$55) at their lowest point last September and first surpassed their pre-pandemic trajectory in June. At that point, rents were stalling while home sales were taking off. But that dynamic is beginning to change.

Zillow says that nine of the nation’s 50 largest metros—Tampa, Riverside, Las Vegas, Jacksonville, Memphis, Phoenix, Virginia Beach, Atlanta and Miami—saw rent levels 10% higher than their projected rent levels for July based on pre-pandemic trends. Rents in Tampa led the way at 15.6% higher.

On the other side, nine metros have yet to see rents catch up to pre-pandemic levels. Those are the more expensive coastal markets, including Los Angeles, Washington D.C., Chicago, Minneapolis, Seattle, Boston, New York, San Francisco, and San Jose.

Still, those markets are making progress. Rents in New York, San Francisco and San Jose were all up year-over-year and posted slight gains after more than a year of consecutive declines. “While the recovery in these expensive markets has taken longer to take effect, their rebound has been strong—and accelerating—in recent months,” according to Zillow.

In a recent report, Freddie Mac Multifamily saw the potential for positive growth in the gateway markets by the end of 2021.

Data from the first quarter of 2021 shows that rents are continuing to decline annually. However, Freddie Mac says that monthly data shows they are starting an upward turn.

“The metros with the most negative 2021 rent projections are starting to see some rent growth take hold during the second quarter,” Freddie Mac said in the report.

Zillow’s report is the latest in a string of reports showing robust growth in residential rents.

Ninety-two percent of the over 100 CEOs and other senior executives of apartment-related firms surveyed by the National Multifamily Housing Council (NMHC) in July said apartments with low vacancy rates and high rent increases were prevalent compared to 67% in April.

The survey also found that capital market conditions were improving for the asset class as well. At 45%, nearly double the number of leaders in July said it was a better time to borrow considering interest rates and non-rate terms against the 23% who felt that way three months earlier.

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