Annual rent growth sees most significant slowdown in five years due to COVID-19
While the for-sale market quickly regained footing in April, rent price growth decelerated to a five-year low due to the coronavirus crisis.
Annual rent growth rate, which rarely rises or falls much on a monthly basis, experienced the most dramatic slowdown since 2014, according to the Zillow Real Estate Market Report.
In April, the typical rent in the US was climbing at a 2.9% pace year over year at $1,594 – the slowest annual rate since December 2017. In comparison, rents were growing 3.4% year over year in March.
The rental market took a severe hit from the coronavirus pandemic as many renters were unable to save for an emergency before losing their jobs during the outbreak, according to Skylar Olsen, senior principal economist at Zillow.
"Rents soared, making it difficult for many to build emergency savings to tap into at a time like now," Olsen said. "We're seeing rents slow now as some people are no doubt pursuing more-affordable options such as moving back in with parents, moving to a less-expensive area or doubling up in instances where it can be done safely."
Of the 35 largest metros, 33 reported a slowdown in annual rent price growth from March to April, with Columbus and Cleveland as the only outliers. Austin (-1.1% month over month), Charlotte (-0.7%), Baltimore (-0.6%), and San Jose, Calif. (-0.6%) saw the largest drops.
Meanwhile, the for-sale market has moved on from the recovery phase to growth stage. Pending sales for new homes rose 13% week over week and almost 50% month over month as of the week ending May 10.
Home values also were also moving at an upward trend in April, with the typical home value up 4.3% year over year to $250,492. Annual home value growth has continued to accelerate every month this year after decelerating for 20 months in a row.
The flow of new for-sale listings is increasing as well, but total inventory remains 20% below last year's already low levels.
"The for-sale market continues to improve and seemingly has the bottom in the rearview mirror, but rent growth has slowed significantly," Olsen said. "Housing was in a generally strong position before the pandemic, with low inventory and high prices shutting many would-be buyers out and creating an unusually high demand for rentals."
