A Blend of Stability and Gradual Changes in the U.S. Rental Market (November 2023 Rental Market Report)
The rental market this November displayed a pattern of steady trends punctuated by minor fluctuations. In November, the typical rent across the United States stood at $1,982 according to the Zillow Observed Rent Index (ZORI), reflecting a slight decrease of 0.2% from the previous month. This movement, or lack thereof, aligns closely with the pre-pandemic norms for this time of year, which traditionally saw little to no change month-over-month.
However, when we zoom out to view the broader picture since the beginning of the pandemic, rents have surged by a striking 29.4%. Year-over-year, rents have increased 3.3%, underscoring the continued upward trend in the rental market.
Diverging Paths: Single-Family and Multi-Family Rents
Beginning this month, Zillow is now producing two additional versions of ZORI to reflect single-family homes and, separately, multi-family homes. Nationally, the annual pace of rent growth remains stronger for single-family homes.
The typical rent for single-family homes in November was $2,148, showing a marginal month-over-month dip of 0.1%. Since the pandemic’s onset, single-family rents have risen significantly, by 35.7%. This trend is reflected in the year-over-year data, with a notable increase of 4.8%. Zillow’s housing predictions for 2024 noted this will likely continue into the new year as more households form and face affordability pressure keeping them out of the for sale market, dubbing the single family rental the “new starter home”.
The data for multi-family homes told a slightly different story. Typical rents for those properties averaged $1,845 in November, down 0.3% from the previous month. This cooldown is likely due at least in part to the huge number of new multifamily buildings that have recently hit the market. With an influx of new buildings coming online, renters are also seeing more than 3 in 10 rental listings on Zillow offering concessions to attract more attention.
Despite the monthly decrease in typical rents and an uptick in incentives, multi-family rents have climbed by 23.3% since the pandemic began, with a year-over-year rise of 2.5%.
Navigating Rent Affordability and Vacancy Rates
The aspect of rent affordability remains a vital concern. In October 2023, the most recent data available, the median household would have to allocate 30% of their income towards a new rental. That is a slight increase from last year and right on the edge of what is generally considered affordable housing. In more expensive markets, renters face a steeper burden, with a higher portion of their income needed for rent. For instance, in Miami, the median renter needs to allocate 43.6% of their income towards rent. In the New York metro area, this figure stands at 40.7%, while in Los Angeles, renters must spend 38% of their income on rent.
The rental vacancy rate, a key indicator of the rental market’s health and competitiveness, stood at 6.4% in September (the most recent data available, from the Housing Vacancies and Homeownership database through the Census), slightly lower than the pre-pandemic average (7.1%) for this time of year. With vacancy rates still low compared to a pre-pandemic fall and affordability remaining a major hurdle in the for sale market, rent demand and thus rent prices will continue to see upward pressure in the coming months.
Rent Changes Were Not Uniform Across Major Metro Areas
- Rents fell, on a monthly basis, in 32 of the 50 largest metro areas. The largest monthly drops were in Raleigh (-0.9%), San Francisco (-0.8%), San Diego (-0.8%), San Jose (-0.8%) and the New York City metro area (-0.7%).
- Rents are up year over year in 47 of the 50 largest metro areas. Annual rent increases are highest in Providence (7.3%), Hartford (7.2%), Cincinnati (6.4%), Columbus (5.8%), St. Louis (5.7%).
Regional Trends in Single-Family Rents
- Single-family rents fell, on a monthly basis, in 28 major metro areas. The largest monthly drops in single-family rents are in Boston (-1.2%), Salt Lake City (-1%), Austin (-0.8%), Portland (-0.7%) and San Jose (-0.6%).
- Single-family rents are up year over year in all 50 of the largest metro areas. Annual single-family rent increases are highest in Providence (9.4%), Hartford (9.2%), Cincinnati (8.3%), Milwaukee (7.2%) and Chicago (6.8%).
Dips in Multi-Family Rents Across 37 Major Markets
- Multi-family rents fell, on a monthly basis, in 37 of the 50 largest metro areas. The largest monthly drops in multi-family rents are in Raleigh (-1.4%), San Diego (-1.2%), San Jose (-1%), Orlando (-0.9%) and Charlotte (-0.9%).
- Multi-family rents are up year over year in 36 of the 50 largest metro areas. Annual multi-family rent increases are highest in Providence (6.9%), Hartford (6.5%), Boston (5.6%), Columbus (5.6%) and Cincinnati (5.5%).
Q3 Rental Vacancies Lower Than Pre-Pandemic Averages
- Non-seasonally adjusted rental vacancy rate was 6.4% in September (the most recent data available). The pre-pandemic average vacancy rate for this time of year was 7.1%.
- The rental vacancy rate is now up 0.3% from last year.
- Rental vacancy rates are lower, on a quarterly basis, in 19 major metro areas. The largest quarterly drops in the rental vacancy are in Riverside (-3.8 pp), Minneapolis (-3.8 pp), Kansas City (-2.7 pp), Indianapolis (-2.7 pp), Memphis (-2.7 pp).
- Rental vacancy rates are higher, on a quarterly basis, in 19 major metro areas. The largest quarterly increases in the rental vacancy are in Cincinnati (4.9 pp), San Antonio (4 pp), Cleveland (4 pp), Birmingham (3.9 pp), Baltimore (3.8 pp).
- Rental vacancy rates are up from year-ago levels in 26 of the 50 largest metro areas.
- Rental vacancy rates are highest in Birmingham (14.1%), Memphis (11.5%), Oklahoma City (11.4%), Phoenix (11.2%) and Baltimore (11.1%).