As the U.S. emerged from the pandemic in the first half of 2021, rents skyrocketed 9.2%, according to Apartment List.
The recovery has been broad. In many cities, rents have passed their pre-pandemic trend.
Don’t expect things to cool off in the second half of the year. In fact, the market may grow even hotter.
Several factors are driving this growth. The Washington Post reports baby boomers selling their homes and deciding to rent instead of re-buy. Young people moving back to cities after living elsewhere during the pandemic are also driving this surge. In addition, new flexible work policies that allow people to live wherever they want are driving up prices in smaller cities.
Add all of this up and it’s easy to see how you have almost 10% rent growth. The question is what comes next? While the home sales market is slowing, prices are still rising. Zillow estimates it will take the average renter a quarter of a century to save money for a down payment. Those increased costs, combined with interest rates possibly rising, will probably keep people in apartments. As offices open and people continue to stream back into cities after living with family or friends, an argument could be made that rents should continue to rise.
Still, leasing traditionally cools off in the fall and winter. But the pent-up demand caused by the pandemic might push peak leasing season later in the year. As rental demand catches up from the pandemic, apartment investors will benefit for the remainder of 2021 and into the future.