Soaring prices. Competetion. Despair. The dramatic conditions for home buyers in the United States over the past year are now reverberating in the rental market.
Homeowners in Tampa, Florida, Memphis, Tennessee and Riverside, California are increasing rents at record speed. For each advertisement, several people apply. Some tenants are forced to check into hotels while they hunt after losing too many times.
“Any desirable rental takes place in a matter of hours, just like desirable sales,” said Shannon Dopkins, real estate agent in Tampa. “A woman died in a place that had been devastated by water damage. Someone else decided to hire it.
After weakening at the start of the pandemic as the economy collapsed and young people weathered blockades as a family, the rental market is now experiencing record demand. The number of occupied rental apartments in the United States jumped by about half a million in the second quarter, the largest annual increase in data going to 1993, according to industry consultant RealPage Inc. Occupancy last month hit a new high of 96.9%.
Rents on newly signed leases jumped 17% in July from what the previous tenant paid, reaching the highest level on record, according to RealPage.
The gains reflect competition for a resource that is increasingly difficult to obtain: housing. With prices soaring in the sale market and the proliferation of bidding wars, potential buyers on the losing side are being forced back to renting.
At the same time, young Americans looking for their first apartment are competing with others who have delayed their plans because of Covid-19. Remote workers – and their high wages – are on the move to lower-cost areas. And the small owners of single-family homes and condos, tempted by the high prices, cash in, leaving their tenants desperate for another place.
“The entire housing market is on fire, from home ownership to rental, high end to low end, coast to coast,” said Mark Zandi, chief economist from Moody’s Analytics. “It is a basic need but increasingly beyond reach.
Eviction bans also help keep the market tight, as around 6% of tenants are normally forced to vacate the premises each year. Zandi believes the country’s affordable housing shortage is the worst since at least the post-war period.
The developers add a new offer. But in the short term, the squeeze will have economic consequences as workers cannot easily travel to find jobs and will have to spend less on things other than housing. Soaring rents are also contributing to the Federal Reserve’s inflation expectations.
They may not yet be accurately reflected in some measurements. The owner-equivalent rent of residences, which represents nearly a quarter of the consumer price index, rose 2.4% in July compared to the previous year. This figure “is out of step with reality” because it is based on a survey of homeowners’ expectations about renting out their homes, Zandi said.
Rents increase the most for those signing new leases. But even the people who renew them are shocked by the stickers. Carmen Santiago, a dental assistant who was paying $ 1,479 a month for a two-bedroom apartment in Tampa, gave her landlord notice in March after the rent increased by $ 300.
The mother-of-two then racked up over $ 1,000 in non-refundable application fees which she passed on to around 10 homeowners, sometimes standing in line without even seeing the properties first. A few days before his lease expired in June, Santiago made a final drive. She visited five apartment complexes, all full. The sixth, a large complex of 22 buildings, had one unit.
The two-bedroom cost over $ 1,900 a month, including a mandatory cable bill – more than Santiago would have paid had she renewed her old lease. She could barely afford it but took it before it was gone.
“I didn’t realize how hard it was to find something,” Santiago said. “Looking back, maybe I should have stayed. “
Dopkins, the Tampa rental agent, said she recently represented a woman who had to put aside plans to move there for her job. After exhausting her relocation package on rental application fees, the client now plans to commute two and a half hours from her home in Ormond Beach, Fla., And perhaps stay in an Airbnb or a room. hotels in Tampa once or twice a year. the week.
Growing demand is most pronounced in Sun Belt cities which have seen an influx of pandemic arrivals. The Phoenix area saw the nation’s largest single-family home rent increases in June, rising nearly 17% from the previous year, according to data released this week by Corelogic. It was followed by Las Vegas, with a gain of 12.9%; Tucson, Arizona, 12.5%; and Miami, up 12.4%.
It’s a reversal from the pre-pandemic norm of tight housing in denser, more expensive cities – places like New York City, Boston and San Francisco, which have seen office workers flee during the closures. These neighborhoods still have a stock of high-end apartments for white collar workers. However, demand is picking up.
The tenants who are now swarming the market have higher wages, in part because many of them would normally buy homes instead. Migration away from expensive places also increases housing costs for residents, especially those in more affordable cities and remote suburbs.
The average income for new leaseholders in July hit a record high of $ 69,252, according to RealPage, which captured data for professionally managed buildings. Since the start of the year, their revenues have increased by 7.5%.
“It’s always been difficult to find a home if you have limited income,” said Jay Parsons, deputy chief economist for RealPage. “What’s crazy now is that you can have a relatively high income and still struggle. “
Nicolle Crim, vice president of the Central Florida division of Watson Property Management, said she wished she had more to offer. But the sales market is so strong that the owners are selling for big profits. As a result, Watson now manages around 4,000 single-family home rentals for individual owners, down by a third since the start of the pandemic, she said.
Even relatively sleepy areas such as Springfield, Illinois, three hours from Chicago, are experiencing shortages. Owner Seth Morrison said his list of apartments alone drew a few dozen calls before removing it.
“We have 270 units and we don’t have any open,” Morrison said. “In a city like Springfield, in a state like Illinois, having this kind of demand is just crazy. “