March 2017 Market Report: Rents Rise at Slowest Pace in Five Years
U.S. rents rose 0.7 percent over the past year, to a Zillow Rent Index (ZRI) of $1,408 per month, the slowest rate of appreciation since November 2012.
- Rents rose 0.7 percent over the past year to a Zillow Rent Index (ZRI) of $1,408 per month, the slowest rate of appreciation since November 2012, when rents climbed 0.6 percent.
- U.S. home values grew 6.8 percent over the past year to a Zillow Home Value Index (ZHVI) of $196,500 in March.
- There are 5 percent fewer homes on the market this year than last, with Minneapolis, Columbus, Ohio, and Seattle reporting the greatest drop in inventory.
After rising for years, annual growth in the nation’s rents is flattening now — sliding below 1 percent year-over-year growth in March for the first time in more than four years. The median U.S. rent climbed 0.7 percent from last March — following a much faster clip of 3.3 percent growth the year before — as new construction began to meet renter demand. The median rent payment is now $1,408, according to the March Zillow Real Estate Market Reports.
Rents in some of the largest and most expensive markets actually fell in March compared to a year ago. In Chicago, they were down 1.9 percent to $1,618 a month, and in Houston, they fell 2.5 percent to $1,544 a month. In San Francisco, rents fell 0.1 percent in March to $3,352, a marked contrast to last March’s year-over-year growth of almost 10 percent. In San Jose, rents dropped 1.1 percent to $3,451 a month, following a nearly 9 percent year-over-year gain last March.
Renters in many markets continue to pay far more on housing than the 30 percent of income threshold personal finance experts recommend. In Los Angeles, the median rent eats up almost half of the median income, forcing renters to find roommates to afford even modestly priced apartments.
The future: Softening demand?
Rent growth is expected to stabilize near its current pace. Zillow’s forecast for the coming year anticipates rents nationally climbing 0.9 percent from March 2017 to March 2018. A flatter growth rate will have lasting impacts on the market going forward. One example: Slower rental growth may take some heat off renters thinking of buying a home just to escape the volatility of steep annual rent hikes.
Read about more possible effects of flattening rent growth.
Home Values, Inventory and Mortgage Rates
The national median home value rose 6.8 percent in March to $196,500. The largest year-over-year gains among major metro areas came in Seattle, Tampa, Fla., and Dallas. In Seattle, home values rose almost 12 percent to $426,300, while values in Tampa and Dallas grew about 11 percent.
Low inventory continues to plague the housing market, with 5 percent fewer homes on the market now than a year ago — which will translate into another extremely competitive home shopping season. The biggest drops came in Minneapolis, which saw a 24 percent drop in homes for sale; Columbus, Ohio, where there were 19.5 percent fewer homes on the market; and Seattle, where buyers had 17 percent fewer homes to choose from.
Mortgage rates are down from their December highs, but remain above pre-election levels. In March, mortgage rates on Zillow ended at 3.94 percent.
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