Rapid Rent Appreciation Reaches Beyond Housing Hot Spots to Smaller, Unexpected Markets

NYC and Silicon Valley rents have been on the rise for years, but now rent is also spiking in smaller housing markets as worsening rental affordability extends its reach

- January's fastest growing rental markets included Denver, Colo., Kansas City, Nashville, Tenn., Portland, Ore., and Charlotte, N.C.

- U.S. rents were up 3.3 percent year-over-year in January, near the historical norm. But rents are rising much more rapidly in some markets. Annual rental appreciation peaked after the housing bust in September 2012 at 6.3 percent.

- In January, national home values rose at a slower pace, up 5.4 percent year-over-year, the ninth straight month of slowing growth.

News provided by

Zillow

Feb 20, 2015, 08:00 ET

SEATTLE, Feb. 20, 2015 /PRNewswire/ -- Median rents continued rising nationwide in January, with rental appreciation in some small and even struggling housing markets catching up to the country's hottest areas, according to Zillow's January Real Estate Market Reportsⁱ.

In Kansas City, for example the Zillow Rent Index (ZRI)ⁱⁱ grew 8.5 percent year-over-year in January, more than twice the national pace and faster than markets where rapidly growing rents are an old story, including Seattle, Boston and Los Angeles.

Two years ago, when West Coast rents were already soaring, rental growth in St. Louis was flat and even falling. But between January 2014 and January 2015, rents there rose 4.2 percent. The fastest growing rent in the country in January 2015 was in San Francisco, where median rent was up 15 percent year-over-year for the fourth month in a row.

U.S. rents were up 3.3 percent year-over-year in January, near the historical norm. The fastest growing rental markets in January included Denver, Colo., Kansas City, Nashville, Tenn., Portland, Ore., and Charlotte, N.C.

Nationally, the Zillow Rent Index rose 3.3 percent year-over-year in January, and 0.4 percent from December, to a median of $1,350. For years, demand for rentals has driven up rents, and income has not kept pace. Currently, Americans should expect to spend roughly 30 percent of their incomes on rentⁱⁱⁱas opposed to historic norms of around 25 percent. And the problem is far from over, according to more than 100 housing experts surveyed in the latest Zillow Home Price Expectations Survey^iv. More than half said they expected rental affordability to continue to be a problem for at least two more years.

"Rental appreciation has been a freight train these past few years, chugging along without any appreciable slowdown. Since 2000, rents have grown roughly twice as fast as wages, and you don't have to be an economist to understand why that is hugely problematic," said Zillow Chief Economist Dr. Stan Humphries. "More than one-third of Americans are renters, and today's renters are tomorrow's buyers. For many current renters, buying a home could mean both a lower and more stable monthly payment, but rising and increasingly unaffordable rents make it difficult to save for a down payment on a home. The rental market used to be and should remain a stepping-stone to homeownership. But given how widespread rental affordability problems have become, the rental market could be acting more like a barrier to buying. More supply will help ease the crunch, both from new construction and as current renters transition into homeownership, creating more vacancies in existing developments. But neither will happen overnight."

Nationally, home value growth continued to level off in January. The U.S. Zillow Home Value Index^vrose 0.2 percent from December and 5.4 percent year-over-year, to a median value of $178,500. Home values are expected to grow another 1.9 percent through January 2016, according to the Zillow Home Value Forecast^vi. By the end of the year, Zillow expects growth in rents to outpace growth in home values.

Metro Area	January 2015 ZRI	YoY ZRI Change	Jan. 2015 ZHVI	YoY ZHVI Change
United States	$1,350	3.3%	$178,500	5.4%
New York/ Northern New Jersey	$2,331	2.1%	$382,900	3.7%
Los Angeles, CA	$2,460	4.9%	$529,600	4.3%
Chicago, IL	$1,609	-0.5%	$187,500	3.6%
Dallas-Fort Worth, TX	$1,443	4.9%	$153,600	8.3%
Philadelphia, PA	$1,546	2.1%	$203,500	4.2%
Houston, TX	$1,497	5.9%	$154,200	12.2%
Washington, DC	$2,103	1.3%	$363,700	3.7%
Miami-Fort Lauderdale, FL	$1,779	2.8%	$212,400	13.2%
Atlanta, GA	$1,233	4.3%	$154,600	10.7%
Boston, MA	$2,149	4.6%	$365,400	3.2%
San Francisco, CA	$3,055	14.9%	$705,900	7.3%
Detroit, MI	$1,096	5.0%	$114,900	7.6%
Riverside, CA	$1,665	4.2%	$284,000	9.1%
Phoenix, AZ	$1,225	5.3%	$203,200	5.6%
Seattle, WA	$1,834	4.9%	$340,400	6.3%
Minneapolis-St. Paul, MN	$1,502	-0.3%	$212,600	5.9%
San Diego, CA	$2,293	4.5%	$470,600	4.1%
St. Louis, MO	$1,138	4.2%	$131,500	2.8%
Tampa, FL	$1,268	3.9%	$148,500	9.3%
Baltimore, MD	$1,713	1.5%	$244,800	2.7%
Denver, CO	$1,827	10.2%	$286,500	14.7%
Pittsburgh, PA	$1,124	4.9%	$125,400	4.4%
Portland, OR	$1,587	7.2%	$278,700	5.2%
Sacramento, CA	$1,629	4.6%	$333,400	7.4%
San Antonio, TX	$1,299	4.3%	$145,700	5.4%
Orlando, FL	$1,311	2.1%	$169,800	9.1%
Cincinnati, OH	$1,208	3.7%	$137,700	4.6%
Cleveland, OH	$1,167	4.2%	$120,500	2.2%
Kansas City, MO	$1,214	8.5%	$138,400	5.9%
Las Vegas, NV	$1,196	1.6%	$186,600	10.5%
San Jose, CA	$3,190	13.4%	$842,700	10.6%
Columbus, OH	$1,251	2.8%	$146,100	4.9%
Charlotte, NC	$1,235	6.1%	$158,000	5.4%
Indianapolis, IN	$1,193	1.6%	$128,200	-0.9%
Austin, TX	$1,657	7.0%	$222,600	10.8%

About Zillow:

Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Stan Humphries. In 2015, Dr. Humphries co-wrote and published the New York Times' bestselling "Zillow Talk: The New Rules of Real Estate. Dr. Humphries and his team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the bi-annual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ: Z), and headquartered in Seattle.

Zillow is a registered trademarks of Zillow, Inc.

ⁱ The Zillow Real Estate Market Reports are a monthly overview of the national and local real estate markets. The reports are compiled by Zillow Real Estate Research. For more information, visit www.zillow.com/research/. The data in Zillow's Real Estate Market Reports are aggregated from public sources by a number of data providers for 928 metropolitan and micropolitan areas dating back to 1996. Mortgage and home loan data are typically recorded in each county and publicly available through a county recorder's office. All current monthly data at the national, state, metro, city, ZIP code and neighborhood level can be accessed at www.zillow.com/local-info/ and www.zillow.com/research/data.
ⁱⁱThe Zillow Rent Index is the median Rent Zestimate® (estimated monthly rental price) for a given geographic area on a given day, and includes the value of all single-family residences, condominiums, cooperatives and apartments in Zillow's database, regardless of whether they are currently listed for rent. It is expressed in dollars.
ⁱⁱⁱ According to Zillow's third quarter report on affordability. More information available here: http://www.zillow.com/research/affordability-2014-q3-8456/
^ivThis edition of the Zillow Home Price Expectations Survey surveyed 101 experts between Jan. 20 and Jan. 29. The survey was conducted by Pulsenomics LLC on behalf of Zillow, Inc.
^v The Zillow Home Value Index is the median estimated home value for a given geographic area on a given day and includes the value of all single-family residences, condominiums and cooperatives, regardless of whether they sold within a given period. It is expressed in dollars, and seasonally adjusted.
^vi The Zillow Home Value Forecast uses data from past home value trends and current market conditions, including leading indicators like home sales, months of housing inventory supply and unemployment, to predict home values over the next 12 months for the nation and for more than 250 markets across the country.