Ryan David didn’t expect the modest one-bedroom apartment he owned in Dupont, Pa., To start a bidding war. But when David listed the second-floor unit in February, he received 160 requests in just a few days – about five times what he normally expected. A potential tenant offered to pay a full year’s rent in advance. Another who had recently moved to the area offered to pay $ 650 per month – $ 50 more than David was asking.
“It really opened my eyes,” said David. “Two years ago people might not want it, but now it was a binge eating.”
Since last summer, David has seen rent for apartment listings in northeastern Pennsylvania soar to $ 700 or $ 800 a month for a one-bedroom – several hundred dollars more than is typical in this working-class enclave, where the largest city was once the industrial Scranton. . At the same time, he observed an increasing number of New York license plates on local streets.
He ended up renting the unit to the family who offered $ 650. “They are great tenants,” he says. He plans to sell another three-unit rental property he owns for $ 125,000, double what he paid two years ago.
Cities have the biggest peaks
After falling last spring, rents in the United States have not only recovered, but are now above their pre-pandemic levels. In 44 of the country’s 50 largest metropolitan areas, rents have exceeded what they were before the health crisis, according to data from Realtor.com. Nationally, the median rent hit a record high of $ 1,575 in June, an 8% increase from a year ago, according to the website.
But this time, it’s not the high-priced urban areas that are putting rent into orbit. Instead, real estate data shows the biggest increases are happening in small towns, in large part thanks to workers who fled urban areas during the pandemic for more safety, space or privacy. .
“It’s a big readjustment, after another big readjustment during the pandemic,” said Danielle Hale, chief economist at Realtor.com.
According to Hale, rents are rising fastest in cities seen as viable alternatives to large urban areas. The fastest growing rents “tend to be [in] affordable neighborhoods, not far from the big guys [urban] areas, but far enough away that you can get a good deal, ”she said.
Riverside, Calif., Has seen the biggest increases in the past year, with typical rents jumping nearly 10% for a studio and 32% for a two-bedroom apartment. However, a comparable two-bedroom would cost $ 600 or $ 700 more in Los Angeles than in Riverside, making the smaller town attractive to Angelenos now able to work remotely since the pandemic.
Meanwhile, Silicon Valley workers have moved from the Bay Area to places like Sacramento, raising the median rent by 20% over the past year to a median of $ 1,800.
“Even though we’ve seen rents go down in the Bay Area, the typical asking rent is over $ 2,800,” Hale said. “Especially if you don’t go to the office every day, there are a lot of other things you can do with that money.”
“We will probably have to go”
The influx of new residents puts financial pressure on longtime residents – with homeowners often keen to take advantage of well-heeled newcomers.
Kellie Andress, 37, lives in DeSoto County, Mississippi, just across the state-Memphis border, since she and her husband lost their jobs in the oil industry and gas in early 2020. In January, they signed a new lease for three-bedroom homes for $ 850 per month. Soon after, “everything skyrocketed,” Andress said. She began to notice that houses like hers were double the rent she was paying, approaching $ 1,900 per month. Then, a friend of Andress who rents from the same management company, received a month’s notice to vacate her apartment.
Andress worries that at the end of her own lease she will have to move out. “In February, if I didn’t have a job in oil and gas or if my husband didn’t get a promotion, we will probably have to leave,” she said.
Andress’s husband, manager of an oil change company, is currently the sole breadwinner – around $ 36,000 a year – or just above the median Pay in the county. Andress stays at home to care for the couple’s two young children.
In the year since the Andress moved to the area, rents in the greater Memphis area rose at the second fastest rate in the United States, with a two-bedroom median in the region at 1 $ 200 in June. Owners report record vacancy rate, with many dwellings re-let even before an existing tenant moves out.
Many homes in the Andress area have been bought by investment firms, and Andress is seeing rental prices rise well above what locals can afford. Its own owner, Mynd Management, revealed last month its intention to buy 20,000 single family homes in the United States
“There are houses here that rent for $ 1,400, $ 1,600 a month, and I just don’t know how it’s possible,” Andress said, adding, “Trying to get into an apartment here. is impossible – they are all just reserved. ”
Housing market crisis
The frenzy of buying a home does not help house prices and rents. There isfor sale today than a year ago, and the few homes available are increasingly going to cash-rich buyers or investors. This pushes up house prices, with the result that 4 out of 10 counties nationwide are considered “unaffordable” for homeownership.
Many first-time buyers, who have fewer resources, find that they cannot compete and must continue to rent.
“Millennials are 30, an age at which we typically see people moving in and out of the rental market. But with the shortage, it’s been difficult for them to make that transition,” said Hale of Realtor.com. “You have a lot of people looking to live somewhere, and that’s contributing to the shortage.”
Bill Gassett, Realtor at Re / Max Executive Immovable, who works in and around Framingham, Massachusetts, saw the market take off a few months after the COVID-19 strike last year. “I went through a few boom cycles… it blew them all away,” said the 34-year-old real estate agent.
Typically, the area would have 50 to 200 homes for sale at a time, Gassett said. This year he only saw five. At the height of the home buying season in April and May, “you could literally put a house on the market and there would be 20 bids on it.”
House rentals are relatively rare there, but Gassett was fortunate enough to cite one earlier this year. The owners were moving overseas and chose to rent out their 3,800 square foot five-bedroom home in Ashland, instead of selling. Their asking rent of $ 4,500 per month shocked Gassett, who recalled thinking, “Damn, that’s a lot of money.”
“But deep in my head I was like, ‘This market is so crazy, and they just might have it,'” he added. “And of course they did.”
Business in big cities goes fast
On the other end of the spectrum, rents in urban centers across the country – New York, Boston, Chicago, Seattle, Washington, DC and the San Francisco Bay Area – remain below where they stood a year ago. year. But real estate agents don’t expect it to last any longer.
In New York City, Joyce Liendo, a broker for the Oxford Property Group, said “1,000%” of its business these days is driven by people returning to the city after waiting for the pandemic in other states.
“A year ago, I couldn’t get people to rent two rooms on the Upper West Side to save my life,” Liendo told CBS MoneyWatch. Last weekend, she listed two apartments in wealthy Manhattan and received dozens of inquiries overnight. Both apartments were rented from the first person to see them.
In many cases, apartment rents in the city’s five boroughs are at or below their levels a year ago. She said less popular neighborhoods outside of Manhattan or less desirable apartments still offer sweeteners like a month’s rent free.
But many potential tenants find that these “incentives disappear very quickly,” she said. “A month ago… people were still trying their luck by asking, ‘Can we have two months free? Oh, no, baby, those days are over! “