Pandemic Shakes Up Rental Market As Pending Sales Make a Comeback

While the for-sale market has been starting its recovery, the rental market is showing signs of strain. In the largest monthly drop in at least five years, annual rent growth has slowed by half a percentage point in April, according to Zillow. The decline has disrupted the steady growth the rental market has had since 2018. Though rent does seasonally fluctuate, looking at the number of cities experiencing a drop in rent is telling: One year ago, 11 of the 35 largest metros had a drop in the growth rate. Now, the count is up to 33 metros. The bright spot for single-family residence home builders? For-sale listings have been increasing and pending sales are up for the month.

Annual rent growth slowed by half a percentage point in April from March, the largest monthly drop in at least five years, as the U.S. coronavirus pandemic and resulting economic slowdown that began in March hit in fuller force last month. But while the rental market slowed, more-recent data from the for-sale segment shows modest acceleration after a slow early-April.

Rent growth had been chugging along at a remarkably stable pace since 2018, with the growth rate rarely rising or falling much from one month to the next. That changed in April, the first full monthly reading since the coronavirus pandemic struck the U.S. Typical U.S. monthly rent was $1,594 in April, according to the newly released Zillow Observed Rent Index (ZORI) — up 2.9% from a year ago, but still the slowest annual growth pace recorded since December 2017. Rents were growing 3.4% year-over-year in March, and that 50 basis point slowdown is the largest since at least 2014, when the ZORI series begins.

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