Home prices have been rising across the country due to pent-up demand and an inventory shortage. But what about the rental segment? According to new Zillow research, rent prices in urban areas have slowed more than in suburban areas. Could this be a sign that renters are making their way to the suburbs?
In urban areas, annual rent growth slowed by two percentage points between February and June, compared to 1.4 percentage points in suburban areas. While a subtle difference, Zillow says this goes against the pre-COVID trend.
The biggest gaps between urban and suburban rent growth were in Dallas-Fort Worth, Sacramento, San Francisco and the greater New York Metro. But not all metros have followed this trend. For example, the following areas have stronger urban rent growth compared to suburban growth: Kansas City, Baltimore, Riverside and St. Louis.
The following markets have had the largest YoY rent growth in urban areas: Phoenix, Ariz. (6.30 percent); Indianapolis, Ind, (5.40 percent); Riverside, Cali. (4.90 percent); and Cleveland, Ohio (4.90 percent).
“It’s important to separate how much of the trend we are seeing comes from shifting tastes as opposed to the economic reality that renters face,” says Zillow economist Joshua Clark. “It may be tempting to conclude that urban renters who have been cooped up without outdoor space and unable to visit their favorite local bar are ready to commit to suburban life, and that is likely true for many. But that narrative ignores the job loss that has hit renters, who are disproportionately employed in the industries most affected, and has likely played a bigger role in recent moves.”
For more information, please visit www.zillow.com.