Housing Market Pushes Buyers to Rentals, Intensifying Demand

Intense demand, bidding wars, fast-rising prices—the rental market is beginning to look a lot like the for-sale market. Demand in the rental market has gone a full 180 from last year as Americans return to cities as the economy improves and priced-out homebuyers search for apartment and single-family rentals. Landlords are receiving more applications than usual, with many applicants offering larger security deposits and coming in with better credit histories, reports CNBC. One Maryland landlord said they have leased properties for 20 years and have not seen this type of applicant pool before. July rents were 7% higher than one year ago for one-bedroom apartments and 8.7% higher for two-bedroom apartments.

Some markets are seeing more demand than others. In the spring of this year, New York City saw its rent applications double compared with 2020, San Francisco saw a 79% increase in prospective renters, and Seattle experienced a 55% jump, according to RentCafe, a rental listing website. Meanwhile Boston saw only a 5% gain, while rent applications rose 8% in Charlotte, North Carolina, and 9% in Portland, Oregon.

For single-family rental homes, the latest read from Corelogic in May showed rents up 6.6% year over year, which is nearly four times the annual increase seen in May 2020.

“Strong job and income growth, as well as fierce competition for for-sale housing, is fueling demand for single-family rentals,” Molly Boesel, principal economist at CoreLogic, said in a release. Boesel said she expects these factors to continue to drive the market this year, especially in and around cities and technology hubs as people start to return to offices.

Single-family rental REITs, namely Invitation Homes and American Homes 4 Rent, have been reaping the rewards, beating estimates in their latest earnings releases on strong occupancy and revenue.

Rental demand pushed American Homes 4 Rent’s results beyond expectations, CEO David Singelyn said in a recent call with analysts.

“Today, the national housing shortage sits at more than 4 million homes,” he said. “This coupled with our single-family rental value proposition provides the backdrop for continued long-term rental demand growth.”

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