Since it began in 2020, the COVID-19 pandemic has had significant effects on rental markets in the United States. Measures which have served to combat the COVID-19 virus, such as physical distancing, have led to a shift in what individuals and families look for in apartments. Asides that, the economic effects of the pandemic meant that the spending ability of many was challenged. These two factors worked together to disrupt the rental markets, with cities with traditionally expensive markets like San Francisco facing a major downturn in rental prices. But it was not all grim though, as demand for affordable housing increased – and with demand exceeding supply, cities with more affordable rents witnessed growing prices. Overall, rental prices fell by about 1.2% across the nation.
Nonetheless, the data from the Apartment List National Rent Report released in the later part of February this year for the month of March has indicated that the rainy days for rental markets in cities like Sans Francisco, and indeed throughout the country, may be over. The index for rental prices across the nation rose by about 0.7%. That is the highest growth it has witnessed since June 2019, and marks two months of growth surpassing previous years in a row, which were averaging 0.3% month-over-month. In fact, this past month’s price index is double the average of what was recorded at this time last year.
Key Takeaways from the Apartment List National Rent Report
- Rents are witnessing positive growth throughout the country.
For the expensive cities like Sans Francisco which were hardest hit by the COVID-19 pandemic in terms of plummeting prices, there seems to be a significant rebound in prices in the market. The more affordable cities which began witnessing growth in prices have not lost steam either, and are still experiencing increased prices – although this is expected to pan out soon. Thus the market is recording an upward growth trajectory, offsetting losses that might have occurred during the pandemic apartment trends.
- Coastal Cities like Sans Francisco are recording recovery in rental prices.
After being the city to lead plummeting prices in the rental market across the country, Sans Francisco has recorded its first month of growth since the start of the COVID-19 pandemic, climbing by 1.2%. Besides this February, Sans Francisco’s prices had shown consistent declining rates, hitting an average of a 3.4% reduction month-over-month from the spring of 2020 through to December. A similar trend is also occurring in other cities where prices had significantly fallen, such as Boston where rental prices reached a 3% growth month-over-month. While rents are still far from returning to the prices they had before the pandemic, the increase presents hope that the market is finally recovering from the sudden changes brought on by the pandemic.
- Expensive markets seem to be converging with the affordable markets
The report showed that during the pandemic, there was a direct relationship between the growth in market prices and the affordability of the markets. In simpler terms, the more affordable cities saw booming rents, and the more expensive cities faced plummeting rents. That has led to a sort of convergence in market prices where what used to be the more affordable cities are not so distant in price levels from the costlier ones. For instance, within a year, the median for a 2-bedroom rent in Sans Francisco and Boise reduced from about 3.4x to 2.2x.
Conclusion
The growth spurt in apartment prices witnessed in February, 2021 might be a strong indicator that normality is returning to the rental market after the disruptions brought on by the pandemic. The effects of changes brought on, such as increased prices in lower-cost cities, may remain long-standing, but they are likely to take on a more gradual stance moving forward.
References
https://www.apartmentlist.com/research/national-rent-data
https://www.globest.com/2021/03/01/apartment-rents-hit-biggest-growth-spurt-since-2019/
