Photo: Eric Fredericks/Flickr
Rising rents have resulted in affordability challenges being felt across the US for the last several years. But last month, rents grew at their slowest pace in nearly five years providing a bit of relief, according to the newly released Zillow March Real Estate Market Report.
Nationally rents rose 0.7 percent year-over-year in March to $1,408, according to the listing site’s rent index. This was the slowest pace recorded since November 2016, when rents were up 0.6 percent year-over-year.
Renters in California finally caught a break, particularly in the Bay Area and San Jose metro area, where rents fell 0.1 percent and 1.1 percent year-over-year, respectively. This comes after appreciating almost 10 percent annually in the Bay Area and 9 percent in San Jose last year.
Seattle, WA, another hot West Coast metro market that has been recording strong rental growth in recent months, also saw a slowdown in appreciation. Seattle rents rose 6.7 percent from last year, but the pace of appreciation has been slowing since August 2016, says Zillow.
Similarly in the Sacramento, CA metro area rents increased 4.7 percent year-over-year in March, but had been rising at nearly 7 percent annually at the end of 2016.
A slowing in the rate of rent appreciation is music to ears of many renters who have been struggling with affordability issues for several years now as rents have been consistently on the rise, particularly in high-demand markets like Los Angeles, Boston, New York, and San Francisco.
Zillow reports that in many major metros the share of income needed to pay rent “well surpasses” the suggested rule of not paying more than 30 percent of income on housing costs — like in Los Angeles, where the median rent takes up nearly 50 percent of the median income, says Zillow.
“The slowdown in rental appreciating is mainly due to new construction finally meeting demand, and even outpacing demand in some areas,” says Zillow’s Chief Economist Dr. Svenja Gudell.
And while the slowing of rent appreciation is certainly good news for renters, many who dream of becoming homeowners are still struggling to save money for a downpayment and continue to pay high rents.
“In most markets, a monthly mortgage payment is more affordable than a monthly rent payment, but the most difficult aspect of home buying for many aspiring home owners is coming up with enough money for the down payment,” Gudell added.
Meanwhile, homebuyers saw national home prices increase 7 percent from last year to $196,500 in March. Inventory continued to tighten, with 5 percent homes for sale in March that the previous year.
Columbus, OH, Seattle, WA and Minneapolis, MN recorded the biggest drops in inventory — 19.5 percent, 17.2 percent, and 24 percent, respectively.
National mortgage rates ended March at 3.94 percent, down from 4.13 percent recorded earlier in the month, according to Zillow. And while interest rates were down from December’s high, they remain higher than they were prior to the election in November.
Click here to read the entire report.