E Economics

U.S. Rents Rise Most On Record

19 August, 2021
Rents

After taking a hit in 2020, U.S. rents are rising most on record according to both housing data providers and largest institutional holders of single-family rental properties.

Housing Data Providers Warn That U.S. Rents Rise Most On Record

Since a few months, one of the key developments in the U.S. housing market has been the rebound of rent prices. Several indexes pointed to a sharp increase. According to Apartment List, the median national rent climbed 11.4% in the first seven months of 2021. On a YoY basis, the median national rent rose 10.3% in July (largest increase since the firm tracked data). Even if some part of the increase reflects a bounce-back in prices that fell earlier in the pandemic, the real-estate firm highlights that rents are now far higher than if they had stayed on their pre-Covid trend.

The same pattern has been observed with other indexes. As a matter of fact, “Typical U.S. rents grew 9.2% year-over-year in July, according to the Zillow Observed Rent Index (ZORI) — the fastest recorded by Zillow records in data that reaches back through 2015 — to $1,843/month.

Meanwhile, according to industry consultant RealPage Inc., rents on newly signed leases soared 14.6% YoY in June, the most on record.

Over the same period, CoreLogic Inc. data showed U.S. single-family home rental prices jumped 7.5% YoY, the biggest gain since at least 2005.

Largest Institutional Holders Of Single-Family Rental Properties Also Registered A Massive Bounce

Among other alternatives measures, several institutional holders of single-family rental properties publish rent prices on a monthly/quarterly basis. Invitation Homes, which owns more than 80,000 single-family homes, pointed to a sharp acceleration in rental increases in the second quarter of 2021, especially for new leases.

rents

The same pattern was observed in results released by American Homes 4 Rent and Tricon Residential, which own respectively more than 50,000 and 30,000 single-family homes. Latest figures from Tricon Residential Inc. also highlight that the trend gained traction at the beginning of the third quarter.

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rents

Conclusion

All measures confirm that market rents have rebounded sharply since the beginning of the year. The current pace of increase is the fastest ever and is still gaining traction. It will become soon a key problem for Fed policymakers in a context where the shelter component of the CPI (also the PCE Price Index) tend to lag market rents. This delay can be explained by data construction and suggests that the recent spike in market rents will impact Fed inflation measures in the coming months. Therefore, policymakers will be under pressure to act by tapering at least MBS purchases before year-end.