Dive Brief:
- Renters seeking to escape high city prices in booming urban markets aren't necessarily going to find relief in the suburbs, according to a Zillow analysis. Monthly rents in U.S. suburbs rose 2.5% year-over-year — marking the first time in four years that suburban rental rates increased faster than urban rentals (2.3%).
- Hot metro areas are seeing the biggest impact after years of skyrocketing rates continue to gobble up more of renters' monthly incomes. Nashville saw suburban rental rates climb 5% versus 1.7% in the city; San Francisco's suburban rates rose nearly 3% while its urban rates fell 0.4%; and Seattle suburban rental prices grew about 2 percentage points faster than urban rentals.
- Nationwide, rents rose at the slowest rate in five years, due largely to the booming multifamily construction building environment.
Dive Insight:
The upward climb of rents in the suburbs could put a strain on renters, as they continue to face rental costs that are growing at a faster pace than incomes. Across the U.S., renters need to bring in another $168 a year to match rental increases. In Seattle, Los Angeles and Boston, they need to bring in more than $1,000 in additional income.
While the rapid pace of rent growth may drive people to make the plunge into homeownership, many could struggle to make that jump, as higher rents mean less money saved toward a down payment for a future home.
Still, there are many markets where it makes more financial sense to own than rent. Of 50 cities studied, Zillow found 37, including Cleveland, Detroit and Milwaukee, where renters could buy a median-priced home while paying the same or less per month on a mortgage than on rent.
Rental occupancy fell slightly in the first quarter of 2017, from 95.1% to 94.5%, though analysts at RealPage and Axiometrics expect the slowdown to be short-lived. New supply is predicted to average 102,000 units each quarter, up from 82,000 per quarter last year and in early 2017.
