How the pandemic impacted the market for houses for rent in the USA
When looking to rent a house in America, price is often a deciding factor. The average house rent price in the USA has been going down since the start of the pandemic, a little over a year ago. The same can’t be said for the prices for houses that are for sale.
The Pandemic has Increased Home Prices and Decreased Rental Prices
The strangest effect that the pandemic has had on cities in the USA has been that price of rent versus value of homes has gone in the opposite direction, with rental prices going down and values of homes going up in value.
For example, when looking at rent price just last year alone, in 2020 the majority of the rent prices decreased to very significant numbers, in some cases more than ten per cent. The price of homes has actually increased by fourteen per cent. This is considered the sixth-largest increase in US history as far as home prices are concerned; and at seven per cent the sixth-largest decline as far as rental prices are concerned. (source)
As a result, it is much easier to find cheap houses for rent in the US. Surprisingly, renting instead of paying for a mortgage could even help you save money in certain cities:In some of the 50 largest metropolitan areas in the USA it is cheaper to rent than to buy. Source: lendingtree.com.
Reason for Increase in Home Prices and Decrease in Rental Prices
Demand Exceeds Supply for Homes for Sale
One of the reasons for the increase in home prices is that there are a lot less homes to chose from for single families in the USA. This was caused by the reduction in the pace of building more single-family houses in the US after the 2008 crash in the USA.
On the other hand, one of the main reasons for the decrease in rental prices is the result of a considerable increase in listings in diverse neighborhoods that include Latino, Black and other diverse non – white neighborhoods. White neighborhoods as a matter of fact have seen rental prices go up. Bottom line – it’s all about supply and demand. (source)
But this is just one example of why the average house rent price in the USA has gone down in, as a result of the pandemic. We will provide a few more later.
Increase in the Average Income
There are several other reasons why the price of homes increased during the pandemic in the USA. One other simple reason is that the average income of a homebuyer in the last 18 months, which was approximately $100,000, is a lot higher than what the average income was in previous years. (source)
In addition to that, because of the pandemic and peoples’ need for increased space, this has led to a higher demand for larger homes with larger living areas. This, combined with very low mortgage interest rates has driven the rate of home purchases much higher in 2020 and 2021.Mortgage rates have decreased to record low since the start of the pandemic. Source: nationalmortgagenews.com
Average Age Group Living in Central Cities Impacted by the Pandemic in the USA
Another reason for the increase in home prices and decrease in rental home prices in the USA has been the increased number of millennials which have entered the real estate market. Millennials are those around the age of 40 to 25 years old. In fact, the number of this age group demographic is the highest it’s ever been in the U.S. In addition to this vast segment of the population growing at such a high rate, this age range is considered the prime age for purchasing a home, making it that much more significant. The millennial age group prefers to purchase a home over renting one. (source)
Weakening High-rise Condo Prices and Impact of the Pandemic
Another impact of the COVID pandemic on houses for rent in the USA is the relative consideration that the effects of this pandemic is going to last. Given the lower rental prices, there has been a reduction in people purchasing high-rise condos as a rental investment. Further, in recent years, the management of rental real estate in the USA has become more demanding and complex.
Major cities that include San Francisco, Miami and New York are just three examples where a large number of condo listings have either expired or been withdrawn, especially in cases of condos valued at over $1.5 Million. (source)
Furthermore, there has been a 128% spike in the number of expired or withdrawn high-rise condo rental listings.
Takeaway - What the Pandemic Has Done to Prices for Rental Homes in the USA
The COVID pandemic has reduced the prices for rental homes in the USA. We have reviewed several reasons for this including the following:
- 1.The increase in rental listings in ethnically diverse neighborhoods has decreased rental home prices in the USA. Supply is outweighing demand, increasing chances of finding cheap houses for rent in the US.
- 2.The high increase of millennials into the market which traditionally prefer to purchase homes over renting one.
- 3.With the lowest mortgage interest rates in history, there are many more opportunities to purchase a home as opposed to renting one. This has increased the purchase of new homes and decreased the rental price of homes in the USA.
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