Mortgage rate volatility drives single-family rent growth, while multifamily moderates (December 2024 Rental Market Report)
December saw softer than seasonally expected rent growth across the country, following several months of rent growth returning to its pre-pandemic norm. The typical asking rent for the entire pool of rental properties across the U.S. was $1,965 in December, just 3.4% higher than the year before. Prior to the pandemic, average rent growth was about 4%. The effects of the pandemic boom remain though, as rents now sit 10% above where they would have been if the 4% growth trend had persisted through the past 5 years. As renters grappled with these rising costs, the income needed to afford rent increased to $78,592 in December.
Denver joined Austin and San Antonio in December as the only metro areas where rents have fallen since last year. While rent growth remains positive in most markets, concessions have given renters short-term reprieve. A record-setting two in five rental listings on Zillow offered a concession in December. Concessions can offer some financial relief to renters, but they can also be a sign of increased vacancies driven by the recent strides in multifamily construction and more renters choosing to stay put.
Rent growth is being fueled by single-family rents, as would-be buyers face significant up-front costs and high and fast-changing mortgage rates that are ultimately keeping them in the rental market. The typical U.S. asking rent for single-family homes was $2,174 in December, an increase of 4.4% from last year and 40.6% over the past five years. Meanwhile, a deluge of multifamily construction has softened rent growth for apartment units. The typical U.S. asking rent for multifamily homes was $1,812 in December, up just 2.4% from last year and 26.2% over the past five years.
As of December, single-family rents were 20% higher than multifamily rents, which is the greatest disparity between these two subsets since Zillow began tracking this data in 2018. While single-family construction has not kept pace with demand in much of the country, Pittsburgh has made exceptional strides. Over the past five years, single-family construction has boomed in Pittsburgh, which softened the imbalance between single-family and multifamily rent prices. As of December, single-family rents were just 14.2% higher than multifamily rents in Pittsburgh.
As we enter 2025, it’s fair to say that concessions in the multifamily market are here to stay. Whether single-family rent growth will continue to rise at a rapid pace ultimately depends on where mortgage rates go, but with limited construction of single-family rentals on the horizon, this segment of the market will likely stay tight. The good news for renters is that more metros may be poised to join Denver, Austin, and San Antonio in the coming months, particularly as more new multifamily construction joins the market.
Rents
- The typical asking rent was $1,965 in December, down 0.2% month-over-month. The pre-pandemic average month-over-month change for this time of year is 0.1%.
- Since the beginning of the pandemic, rents have increased by 33.1%.
- Rents are now up 3.4% from last year.
- Rents fell, on a monthly basis, in 32 major metro areas. The largest monthly drops were in Denver (-1.3%), Salt Lake City (-0.6%), San Jose (-0.6%), Portland (-0.6%), and Austin (-0.5%).
- Rents rose from year-ago levels in 47 of the 50 largest metro areas. Annual rent increases were highest in Hartford (7.9%), Cleveland (7%), Richmond (6.5%), Providence (6.2%), and Chicago (5.8%).
Single-Family Rents
- The typical asking rent for single-family homes was $2,174 in December, up 0.1% month-over-month. Since the beginning of the pandemic, single-family rents have increased by 40.6%.
- Single-family rents are now up 4.4% from last year.
- Single-family rents fell, on a monthly basis, in 20 major metro areas. The largest monthly drops in single-family rents were in Salt Lake City (-1.2%), Boston (-0.8%), Buffalo (-0.6%), Denver (-0.5%), and Virginia Beach (-0.4%).
- Single-family rents rose from year-ago levels in all of the 50 largest metro areas. Annual single-family rent increases were highest in Hartford (7.7%), St. Louis (7.6%), Cleveland (7.4%), Chicago (6.8%), and Indianapolis (6.6%).
Multifamily Rents
- The typical asking rent for multifamily homes was $1,812 in December, down 0.3% month-over-month. Since the beginning of the pandemic, multifamily rents have increased by 26.2%.
- Multifamily rents are now up 2.4% from last year.
- Multifamily rents fell, on a monthly basis, in 35 major metro areas. The largest monthly drops in multifamily rents were in Memphis (-1.4%), Denver (-1.4%), Birmingham (-0.8%), San Antonio (-0.7%), and Portland (-0.7%).
- Multifamily rents rose from year-ago levels in 42 of the 50 largest metro areas. Annual multifamily rent increases were highest in Hartford (8.3%), Cleveland (6.3%), Providence (6.3%), Richmond (5.8%), and Chicago (5.4%).
Rent Concessions
- 40.9% of rentals on Zillow offered concessions in December.
- The share of rental listings offering concessions increased by 2.3ppts month-over-month in December.
- The share of rental listings offering concessions increased by 8.3ppts from last year.
- The share of rentals with concessions fell, on a monthly basis, in 2 major metro areas: St. Louis (-3.3ppts) and Jacksonville (-0.4ppts).
- The share of rentals with concessions rose, on a monthly basis, in 47 major metro areas. The largest monthly increases in the share of rentals with concessions were in Houston (6.7ppts), Kansas City (6.2ppts), Milwaukee (6.1ppts), Salt Lake City (5.9ppts), and Raleigh (5ppts).
- Rent concessions are up from year-ago levels in 48 of the 50 largest metro areas. The annual increase in share of rental listings with concessions were highest in Denver (18.7ppts), Louisville (18.6ppts), Raleigh (16.8ppts), Indianapolis (15.6ppts), and Nashville (14.9ppts).
Rent Affordability
- The median household would spend 29.3% of their income on a new rental in December. That is 0.1ppts higher than the month prior and 0.2ppts than last December.
- The pre-pandemic share of median household income spent on rent was 26.9%.
- The most affordable metro areas for rents were Austin (19.6%), Minneapolis (20.1%), St. Louis (20.2%), Salt Lake City (20.2%), and Milwaukee (20.4%).
- The least affordable metro areas for rents were Miami (40.9%), New York (38.8%), Los Angeles (36.7%), San Diego (33.3%), and Riverside (33.2%).
- The income needed to afford rent increased by 3.4% year-over-year in December to $78,592.
- Since pre-pandemic, the income needed to afford rent has increased by 33.4%.
