While rents started the year at a stable pace, that growth hit the brakes this spring due to the COVID-19 pandemic. In addition, rent prices in urban areas have slowed more than in the suburbs, a possible signal that renters’ preferences may be shifting toward suburban areas, according to data from Zillow.
The jump in unemployment across the nation has hit renters harder than homeowners, with millions moving back in with family members and impacting rental demand. According to Zillow, this trend has caused rent growth to slow from February to June.
In addition during this same time period, rent growth has slowed 2 percentage points in urban ZIP codes compared with 1.4 percentage points in suburban areas. While the split is small, it goes against the trend seen just prior to COVID-19’s onset. While urban and suburban renters are both missing rent payments or moving home during the pandemic, less expensive apartments in the suburbs now may be more appealing for those renters who no longer need to commute or cannot enjoy some of the urban living amenities.
“It’s important to separate how much of the trend we are seeing comes from shifting tastes as opposed to the economic reality that renters face,” said Zillow economist Joshua Clark. “It may be tempting to conclude that urban renters who have been cooped up without outdoor space and unable to visit their favorite local bar are ready to commit to suburban life, and that is likely true for many. But that narrative ignores the job loss that has hit renters, who are disproportionately employed in the industries most affected, and has likely played a bigger role in recent moves.”
The urban and suburban rent growth split was seen in more than half of large U.S. metros studied by Zillow, with the biggest gaps in Dallas-Fort Worth; Sacramento, Calif.; San Francisco; and the greater New York City metro.
However, not all markets were following this pattern. The metros where urban rent growth has been stronger than in the suburbs include Kansas City, Mo.; Detroit; Baltimore; and Riverside, Calif.
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