Driven by migration away from expensive city centers during the pandemic, the rental price advantage of living in the suburbs (vs. urban areas) has shrunk by 52.9% compared to three years ago, according to the Realtor.com Monthly Rental Report.
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As the U.S. median rental price hit its latest all-time high in July ($1,879), a new survey from Avail (part of Realtor.com®) found that moving to a new rental has been costlier for renters, but there may be market cooling on the horizon as landlords adjust to renter budgets impacted by inflation.
National rents reached a new high for the 17th month in a row in July, even as rent growth further moderated. So far this year, annual rent gains have been consistently getting smaller month-to-month, indicating a shift toward a more sustainable balance of rental supply and demand.
On the one hand, this offers encouraging signs of relief, with more on the horizon as builders pick-up construction of apartments. On the other hand, renters continued to grapple with affordability challenges in July, driven by still-low vacancy rates that kept rents high and inflation (8.5%) that outpaced wage growth (+5.2%).
Additionally, comparing today's rental trends to the 2019 market highlights how renters now face higher costs in a greater variety of areas, as renting in the suburbs no longer offers as much of an affordability advantage over big cities as it once did.
While the rise in remote work and migration away from downtown areas gave suburban rents room to catch-up to urban rents earlier in the pandemic, the return to downtown life and offices is now driving an especially strong resurgence in big city rents.
In July, the U.S. median rental price hit its latest new high ($1,879), but only increased by $3 over June as rent growth year-over-year (+12.3%) continued moderating to its slowest pace since August 2021 (+11.5%).
Overall rents posted low double-digit gains over July 2021 levels across all unit sizes in July: Studios, up 14.3% to $1,555; one-bedrooms, up 12.2% to $1,745; and two-bedrooms, up 11.7% to $2,103.
Among the 50 largest metros in July, rental prices grew most quickly year-over-year in the south and northeast, led by Miami for the 10th straight month (+26.2%).
Rounding out July's five fastest-growing rental markets were New York (+25.4%), Boston (+24.8%), Chicago (+20.6%) and Orlando, Fla. (+20.4%).
In four out of these five markets, urban rents grew at a faster yearly pace than suburban rents, most significantly in New York (+25.4 percentage points) and followed by Chicago (+15.7), Boston (+11.6) and Miami (+6.2); the growth rates were roughly even in Orlando (+19.5% vs. +20.3%).
Nationally, July rent growth year-over-year was slightly faster in urban areas, up 12.8% to a median $1,927.5, than in suburban areas, up 11.7% to a median $1,821. This is a marked reversal from earlier in the pandemic in January 2021, when urban rent was falling by 2.5% while suburban rent was growing by 3.9%.
Despite the recent resurgence in big city rents, shifts during COVID significantly shrank the gap between urban and suburban rents from July 2019-2022 – by 52.9% or $68 per month. ■