Single-Family Rents Climb to Record High MABA MassachusettsRealEstate FirstTimeHomeBuyers MaBuyerAgent

 According to Zillow‘s most recent market report, rented single-family homes are currently the most notable item on the real estate market, with prices twenty percent higher than those of a typical multifamily apartment. That is the biggest difference Zillow has ever seen.

 While builders’ response has kept multifamily rent growth steady for several months and stubbornly high mortgage rates are limiting buyer demand and home value increases, detached single-family home rentals are still rising at an accelerating rate.

Key Findings:

• Rents for single-family homes are up a estimated forty one percent over pre-pandemic norms, while multifamily rents have risen twenty six percent in that time. 
• Concessions are being offered on two out of every five rental properties on Zillow, another record. 
• For-sale inventory continues to recover, but is still twenty five percent below pre-pandemic norms. 

“Right now, more multifamily units are hitting the market than at any time in the past fifty years, but detached homes aren’t seeing the same surge in construction,” said Skylar Olsen, Chief Economist at Zillow. “We’ve also got the large millennial generation wanting to move into a larger space. High and unpredictable mortgage rates and hefty down payments are pushing some to rent that lifestyle instead of buying it. Similarly discouraged, some homeowners may return to the market and sell to capitalize on record prices, rather than continue to wait for lower rates.”

 In terms of yearly growth, apartment rentals are increasing at a comparatively steady two point four percent annually, which is somewhat less than the mid three percent rise observed in 2018 and 2019, while detached home rents are up four point four percent, which is comparable to their trajectory prior to the pandemic. In the meantime, owned home value growth has leveled out at two point six percent annually, down from five point two percent in December 2019.

 Rentals for single-family homes have increased forty one percent since the pandemic began, while rentals for multifamily homes have increased twenty six percent. The biggest price differential among the fifty major U.S. metro areas is found in Salt Lake City, where single-family rentals are fifty nine percent more expensive than multifamily units. Pittsburgh, whose single-family building has increased dramatically over the last five years, had a low fourteen percent differential, while Detroit had the least delta percentage at nine percent.

Overview of Rent Affordability:

 The median household would spend twenty nine point three percent of their income on a new rental in December. That is an estimated point one points higher than the month prior and point two points than last December. The pre-pandemic share of median household income spent on rent was twenty six point nine percent.

 The income needed to afford rent increased by three point four percent year-over-year in December to $78,592. Since pre-pandemic, the income needed to afford rent has increased by thirty four point four percent.

The most affordable metro areas for rents were:

1. Austin, Texas (nineteen point six percent)
2. Minneapolis (twenty point one percent)
3. St. Louis (twenty point two percent)
4. Salt Lake City (twenty point two percent)
5. Milwaukee (twenty point four percent)

The least affordable metro areas for rents were:

1. Miami (forty point nine percent)
2. New York (thirty eight point eight percent)
3. Los Angeles (thirty six point seven percent)
4. San Diego (thirty three point three percent)
5. Riverside, CA (thirty three point two percent)

 Some of the metros listed above… no surprise there, right? California metros are notoriously expensive, while tourist spots like the “Big Apple” and Miami have also historically boasted exceedingly high rent rates.

Measuring Single-Family Rents:

 Single-family rents are now up four point four percent from last year. The typical asking rent for single-family homes was $2,174 in December, up point one percent month-over-month. Since the beginning of the pandemic, single-family rents have increased by forty point six percent.

 Overall, single-family rents fell, on a monthly basis, in twenty major metro areas. The largest monthly drops in single-family rents were in:

1. Salt Lake City (negative one point two percent)
2. Boston (negative point eight percent)
3. Buffalo, NY (negative point six percent)
4. Denver (negative point five percent)
5. Virginia Beach, VA (negative point four percent)

 Single-family rents rose from year-ago levels in all of the fifty largest metro areas. Annual single-family rent increases were highest in:

1. Hartford, CT (seven point seven percent)
2. St. Louis (seven point six percent)
3. Cleveland (seven point four percent)
4. Chicago (six point eight percent)
5. Indianapolis (six point six percent)

Examining Multifamily Rents:

 Multifamily rents are now up two point four percent from last year. The typical asking rent for multifamily homes was $1,812 in December, down point three percent month-over-month. Since the beginning of the pandemic, multifamily rents have increased by twenty six point two percent.

 Multifamily rents fell, on a monthly basis, in thirty five major metro areas. The largest monthly drops in multifamily rents were in:

1. Memphis, TN (negative one point four percent)
2. Denver (negative one point four percent)
3. Birmingham, AL (negative point eight percent)
4. San Antonio (negative point seven percent)
5. Portland, OR (negative point seven percent)

Conversely, multifamily rents rose from year-ago levels in forty two of the fifty largest metro areas. Annual multifamily rent increases were highest in:

1. Hartford, CT (eight point three percent)
2. Cleveland (six point three percent)
3. Providence, RI (six point three percent)
4. Richmond, VA (five point eight percent)
5. Chicago (five point four percent)

Concessions Rise as Rents Remain “Sticky”

 Multifamily rents are proving to be sticky, even with the overall increase in apartment development. Over the previous year, annual rent growth has been rather steady, hovering around two percent.

 Instead, in an effort to attract tenants, property managers are increasingly using concessions. Now, forty one percent of all rental listings on Zillow include these deal sweeteners, such free parking or months of rent, which is another new high. For more information, see Zillow’s Rental Market Report. The largest generation in the US, millennials, are delaying home ownership by renting for a longer period of time. According to Zillow’s most recent Consumer Housing Trends Report, the median age of renters increased from thirty three to forty two in 2024.

 Additionally, inventory is still moving in the direction of long-term pre-pandemic norms. December saw just under one million properties on the market countrywide, which is more than any December since 2019. Compared to the record deficit of fifty one percent in February 2022 or the thirty seven percent shortage in January 2024, inventory is currently twenty five percent below the 2018–2019 norms for this time of year. There will be less competition for the newly listed homes and slower price growth in the future if buyers have more options.

 If all goes well, the recent trend of sellers going back into the market some perhaps not believing that mortgage rates will fall soon enough to help their own purchasing circumstances will continue to pick up steam in the next year.

 There are now more homes for sale in ten of the fifty biggest major metro areas than there were at this time of year prior to the pandemic. Although Denver is included, builders have been better able to meet demand in the South, Florida, and Texas, which make up the majority of those metro areas.

 Those who are thinking about purchasing a home in 2025 should ensure that their credit is in excellent standing now and, if at all possible, begin taking action to raise their score.

To read the full report, including more data, charts, and methodology, click here.

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