The rapid increase in home prices leveled a bit last month, but rents were much higher than in August 2020.
Realtor.com reports the cost of renting a home hit double-digit growth for the first time in two years in August, and it grew three times faster than in March 2020. Rents grew by double-digits in more than half the nation’s 50 largest housing markets, with Tampa leading the way with a 30.6% year-over-year increase.
"Put simply, August trends suggest rents are making up for lost time,” said Realtor.com chief economist Danielle Hale.
Rents flatlined early in the pandemic
Hale notes that rents remained low during some of the worst months of the pandemic. For example, rents grew less than 2% from September 2020 to March 2021. One factor was a migration from urban apartments to suburban single-family homes.
"Now we've reached a stage in the COVID-19 recovery where people are ready to move, and we're seeing urgency to find new living spaces immediately,” Hale said. “A lot of this demand can be attributed to vaccines opening up offices and city-life, young adults feeling more confident to strike out on their own, and homebuyers needing to take a break from the red hot housing market.”
In August, the median rent was a little over $1,600 a month. With many people moving back to urban areas, Hale predicts renters could see even more increases over the next few months.
Home prices have slowed
That could make purchasing a home a little more attractive. Zillow’s latest market report shows home prices leveled off in August, largely due to an increase in homes on the market and some price reductions.
"The strong recovery of inventory and initial lift off the gas pedal for home value appreciation is indicative of balance returning to the market," said Nicole Bachaud, economic data analyst at Zillow. "But, the major demand drivers that have pushed the market to extremes this year are still present — we're moving from a white-hot midsummer to somewhere closer to red hot as we head into the fall."
According to the Zillow report, U.S. home values are up a record-breaking 17.7% from a year ago. That put the typical U.S. home value in August at $303,288. The housing markets that saw the fastest growth are Austin, where the average home increased in value by 44.8%, and Phoenix, where home values grew 31.8%.
"Another month of rising for-sale inventory gives shoppers more options to choose from and less competition, which should help reduce bidding wars and further moderate rampant price hikes," Bachaud said. "A slightly less frenzied market means buyers have a much better chance to land the home they're bidding on, and may even see a price drop on their saved listings, but keep in mind the market is still much hotter than normal for this time of year."