Gone are the days of setting out on a quest to secure a rental home resulting in same-day success. At least for now, as the pandemic-era housing market reveals obstacles such as a market flooded with high demand, soaring prices and low stock of available options. Historically, Americans dubbed purchasing a home a daunting task; however, renters competing in the still-hot housing market face their own obstacles.
Affordable housing and higher-end rentals are similarly inflicted, mainly boiling down to supply-and-demand contradictions. According to a report from the Joint Center for Housing Studies at Harvard University, the third quarter of 2021 witnessed 44 million renter households in the United States compared to roughly 870,000 in the first quarter of 2020.
Additionally, the median rent across the 50 largest U.S. metropolitan areas reached a new record level for Realtor.com data at $1,876 in June. Some indicators demonstrate that the rent eruption of the past two years may be subsiding, as seen in the continuous fall of year-over-year rent growth.
“Local unemployment rates continue to be strong predictors of rent growth,” said Joel Berner, Realtor.com senior economic research analyst.
Stronger economies attract more workers who are better equipped to compete for leases and pay higher rents compared to cities more saturated with unemployed citizens who are less able to pay fast-growing rent prices.
Berner said the gap between average rent and average buy costs nationwide has tripled, citing increased listing prices and mortgage rate increases as contributing factors. In addition, several areas favor buying over renting, with median rents at or below the national average and monthly buy costs for starter homes well below the national average. In contrast, rent favorability thrives in areas where the monthly buy cost is nearly double the monthly rent cost.
There’s been robust growth in the younger populations boosting rental demand.
“Members of the huge millennial generation are moving through their 20s and 30s, the ages when renting is most common,” said Berner.
Additionally, an influx of people in the rental market due to less accessible home ownership pushes rent costs even higher as multiple generations vie for limited rental housing availability.
Conversions of single-family homes to owner-occupied units reduced the stock available for renters. American Housing Survey data indicates that 16% of single-family homes rented in 2017 were owner-occupied in 2019. As a result, more rental housing is needed, but at prices a wider array of households can afford.