The cost of renting an apartment is surging, especially in major cities where rents plunged during the pandemic. A new report from Realtor.com shows that people who fled urban areas during the pandemic are moving back.
Rents fell sharply early in the pandemic because fewer people wanted to live in congested urban areas when they were working remotely. But in September, Realtor.com data shows that rents in the 10 biggest U.S. technology cities like Austin and New York were 6.3% higher than in March 2020.
‘Past the recovery phase’
On a national basis, the report shows that rents grew at a double-digit annual pace -- 13.6% -- for the second month in a row. George Ratiu, manager of Economic Research for Realtor.com, says the nation’s big tech hubs saw the fastest growth.
"September data confirms the U.S. rental market has moved past the recovery phase and is fully back in business,” Ratiu said. “Rental demand remains unseasonably high, driven by still-limited housing supply, rising mortgage rates pushing buyers towards renting, and more people returning to big cities."
The move from U.S. cities to the suburbs early in the pandemic fed demand for single-family homes, so prices for those houses skyrocketed. While the housing market has cooled a bit, prices remain at all-time highs.
“Rents didn't rebound from COVID-19 declines as quickly as for-sale home prices, but rental activity has now reached a level not unlike the homebuying frenzy seen earlier this year, before fall seasonality kicked in,” Ratiu said. “The good news is that if rents continue to parallel home listing prices, rental price growth could potentially begin cooling this winter."
Technology centers see the most demand
Realtor.com notes that the rebound in rents in technology centers like San Francisco and Austin began in April, at about the time the vaccine rollout reached critical mass. Over the last two months, rents have accelerated even more.
The average rent in the 10 largest U.S. technology cities grew by 9.9% year-over-year in September and was 6.3% higher than in March 2020. During the height of the pandemic, rents were down as much as 7.2%.
Rents in Austin experienced the biggest September gain, rising 22.3%. Rents were up 15.5% in Denver. Seattle, where rents fell 12.1% at one point during the pandemic, recorded an average rent increase of 8.1% in September.
Raitu says the days of rental deals in metros like San Francisco and Manhattan may be over, but he sees a silver lining for renters with more flexible timelines. He believes people who sign a lease in January or February may end up getting slightly better deals.
He also says people who must rent an apartment now should be prepared to compromise on location and amenities to remain within their budget.