While the housing market began rebounding in May with record sales well into the fall, the rental market wasn’t so lucky, according to RentCafé’s year-end analysis published on Thursday. In addition to a condensed rental season, rental activity declined 10 percent year-over-year in some of the nation’s largest markets as renters decided to renew leases instead of moving elsewhere.
“Ten percent fewer renters applied for new apartments this year, breaking a years-long trend of single-digit increases,” the report read. “This is in line with the findings of a renter survey conducted on rentcafe.com in April of this year when 11 percent of renters said they are staying put when asked about their plans to move during the pandemic. ”
Much like the for-sale market, RentCafé said the rental market took off in May with a 27 percent month-over-month increase in renter activity, which includes renter application and lease-signing rates. However, the renter activity boom fizzled out in July (-13 percent m-o-m) and continued to decrease through September (-19 percent m-o-m).
The decline in renter activity wasn’t concentrated in one region; however, southern and Midwestern markets experienced the largest decline in activity this year. Renters in Memphis, Tennessee (-21 percent), Chicago (-16 percent), Louisville (-11 percent), Seattle (-11 percent) and Washington D.C. (-8 percent) opted to renew their leases while renters in Detroit (+23 percent), New York City (+15 percent) and Charlotte, North Carolina (+13 percent), Fort Worth, Texas (+11 percent), and Denver (11 percent) were on the move.
Although rents declined in 18 of the 30 largest markets, with notoriously expensive markets including San Francisco (-17.3 percent), Manhattan (-10.8 percent) and Seattle (-8.5 percent) reporting the biggest declines, stagnant wages and booming unemployment rates prevented renters from taking advantage of lower prices.
Renters’ median income increased 1.5 percent year-over-year to $36,552, which is a 3.6 percent decrease from last year’s income growth pace. Among renters who moved, the majority (41.2 percent) reported annual incomes of $25,000 to $50,000 per year. The wealthiest renters, those making more than $125,000, were the least likely to move (7 percent), followed by those making more than $100,000 (18.7 percent), and those making under $25,000 (23.9 percent).
Amid declining renter activity and a medley of other negative factors, such as booming employment rates and fears about a wave of evictions, RentCafé said there was one silver lining: Gen-Zers.
“The Gen Z renter segment is the only one to see an upward trend in movement in the past three years, as the share of rental applications from all other generations has been shrinking,” the report read. “Millennials, the largest renter generation, now make up 47 percent of renters on the move, after accounting for more than half of renting activity in the past two years.”
From 2018 to 2020, Gen-Zers increased their share of renting activity from 12 percent to 23 percent. Meanwhile, Gen-Xers’ renting activity declined 2 percent during the same time period as they move toward homeownership.
Looking forward, RentCafé predicted the 2020’s rental trends will spill over into 2021 as renters, just like homebuyers, begin turning their attention to smaller, more affordable secondary markets and demand virtual renting experiences.
“We are witnessing important changes in the fabric of the rental market,” the report read. “Virtual and self-guided tours are now commonplace when it comes to apartment viewing, and renters have unprecedented access to zero-face-to-face-interaction technology, from searching for apartments to signing a lease and managing their rental.”
“Despite a slowdown in renting activity and an unusually short peak rental season, the past year has revealed just how adaptable apartment leasing can be,” it added.
