Housing shortage continues to drive up rent and home prices

Photo (c) Nora Carol Photography - Getty Images

Rental bargains are disappearing while home-buying competition remains fierce

It’s not only getting harder to buy a home, it’s getting more difficult -- and expensive -- to rent one.

When the pandemic prompted many apartment dwellers to move out and purchase single-family homes, rents flatlined and landlords offered incentives to keep their units occupied. But a new report from realtor.com shows that rental bargains are now few and far between.

Rents in the nation’s 50 largest housing markets rose in March for the first time in eight months, increasing 1.1% year-over-year. The median rent last month in those same markets was $1,463. It marked a reversal from the preceding months, when rent growth had slowed from 2.2% in July 2020 to just 0.6% in February.

"Although we're still below the 3.2% growth we were seeing before COVID, average rent growth in the nation's largest housing markets saw its first uptick since July 2020, and rents are poised to rise at a quickening pace as recovery continues,” said realtor.com Chief Economist Danielle Hale.

But Hale says there are exceptions. Markets dominated by high-tech employers, along with large metros like Chicago and Los Angeles, are actually seeing rent declines. But she says that could change in the coming months as the red-hot housing market eventually increases competition for rentals.

Home prices still rising by double-digits

Real estate broker Redfin reports that the median home sale price has increased by 18% year-over-year to $344,625, an all-time high. It attributes the rise to a trend that has occurred throughout the pandemic -- families in search of more space.

More buyers and fewer available homes have given sellers the upper hand. The Redfin report shows that asking prices reached an all-time high of $356,175 during the last four weeks. Homes that sold were on the market for an average of just 21 days before going under contract -- the shortest time since 2012.

More telling, 45% of homes sold for more than their list price, an all-time high. This was 18 percentage points higher than the same period a year earlier.

Hope for buyers?

With homebuilders producing fewer new houses, the housing market is dependent on owners of existing homes to list their properties for sale. Now that the pandemic appears to be winding down, real estate marketplace Zillow reports that more people are doing just that.

The inventory of homes for sale went down 1.1% last month, but Zillow notes that the decline was the smallest since July. Zillow takes that as a sign that listings have resumed normal seasonal patterns and predicts that frustrated buyers could find more choices in the months ahead.

However, prices are still going up. Zillow reports that home value appreciation pushed the accelerator closer to the floor in March, rising a record 1.2% month-over-month to $276,717. 

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