Question: How often are we hearing from relocating employees that they are planning to rent for a while in their new location as opposed to buying?
Answer: A LOT! Maybe more than ever.
Despite incredibly low mortgage rates, in June 2021, home prices across the U.S. surged 24.8% year-over-year — to a median sale price of $386,888 — according to Redfin. With homes sold increasing over 20% and the number of homes for sale dropping almost 40%, you can see why many people have been priced out of buying. Buyer fatigue is very real in many markets, but now these would-be-buyers-turned-renters are creating an upswing in rental prices, too.
With a record volume of higher-quality applicants, landlords have been able to raise rents. In July, rents nationally rose 7% year-over-year for one-bedroom apartments and 8.7% for two-bedroom apartments. That is up from 5% and 6.5% annual gains in June, according to Zumper, a national rental listing platform.
One direct effect from the pandemic on the rental market is that the eviction moratorium — which was recently extended — has created a situation where some landlords, not being able to evict non-paying tenants, have less supply to offer to people who can pay. Also, to offset some of their loss, many have raised rents where demand supports the increase.
Wondering where the highest rents are currently? While there are big cities where rent remains down compared to a year ago, their ranks are thinning out. According to this Fortune Builders article leveraging recent 2021 data from Apartment Guide, here's the top five cities with the highest average rents currently (based on prices for a one-bedroom unit):
- New York City - $3,825
- San Francisco - $3,188
- Boston - $3,117
- San Jose - $2,476
- Washington D.C. - $2,199
Then the top five U.S. cities with the largest rental increase (April 2020-April 2021) were:
- Las Vegas - up 45.6%
- Buffalo - up 41.8%
- Scottsdale - up 36.8%
- Detroit - up 31.4%
- Tucson - up 28.8%
Other metro areas that have experienced crazy growth include Phoenix, Miami, Atlanta, Dallas, Orlando, San Diego and Tampa Bay.
Lastly, when you look at single-family rental homes, rents have surged as would-be-buyers hold off until for-sale housing becomes more affordable. According to CoreLogic, in June, single-family rent growth reached its highest level since at least 2005, up 7.5% year-over-year. With single-family rent growth having increased five-fold year-over-year in June, whether relocating employees are looking to buy or rent, the challenge in this not-quite-post-pandemic environment is more challenging than ever for many of their destinations!
What does this mean for your relocation program? Well, the environment in many destination housing markets will create stress and the potential for exceptions for support like household goods storage and extra time for temporary accommodations. We have shared some information recently about what exceptions can mean for your program. so if you missed it, try one of these:
They are usually reserved for homebuyers, but bidding wars are becoming more common in the rental home market. Demand for apartment and single-family rentals is surging and outpacing supply. As the economy improves, workers are moving out of shared living situations and looking for their own homes. In addition, the housing market is so expensive right now that many would-be buyers are being priced out. That has them looking for rentals. Some landlords are seeing more than a dozen applications for good properties – and renters offering well above the asking rent.