The first quarter of 2019 was chaotic thanks to the government shutdown, several major snowstorms and a bomb cyclone. Despite the recent tumult, rents across the country are up and have continued to rise after last year’s slowdown ran out of juice.
The typical rent in the United States is currently $1,530, up 3.1 percent from last year. After years of strong growth following the economic recovery, renters got some relief last year as rent growth slowed from its peak in summer 2016. It now appears that 2019 might play out differently thanks to accelerating growth over the past few winter months, which typically see less rental activity and subdued growth. The growth we see now should stick around through the summer renting season, when more shoppers typically help push up prices.
The growth in national rental prices was led yet again by the booming Phoenix metro, where renters are seeing prices that are 6.6 percent higher than they were last year. Even more worrying to Phoenix renters, a slowdown seems unlikely at this point as year-over-year growth has now increased each month for more than a year.
However, there are encouraging trends in some of the other fastest-appreciating rental markets in the country. Sacramento and Orlando are the second and third fastest growing rental markets, respectively, with rents for both markets about 5.9% higher than a year before. Unlike in Phoenix, renters in these markets have been seeing that number fall. Orlando was seeing appreciation a half percent higher just as recently as November and Sacramento has seen steady declines for that number since late 2017, when it peaked at about 8 percent.
One notable outlier from the national trend is Houston. Since last quarter, rent growth in the nation’s fifth largest metro has fallen more than anywhere else in the nation, and quickly – currently rents in Houston are up only 1.8%.
Last year one of the biggest stories in the rental world was the slowdown in New York. The country’s biggest metro is still the slowest-growing rental market in the country with rents only 1.4 percent higher than they were a year ago, but things are changing fast. Appreciation was at about 1 percent in September but has increased every month since then.
The first quarter of 2019 also saw the release of the worst jobs report since September 2017 – the economy only added about 20,000 jobs in February. It is important not to put too much weight on any one job report, especially this past February’s, which was likely impacted by poor weather and lingering effects of the government shutdown. Overall U.S. employment has grown steadily since the end of recession and February’s poor report is more likely a blip than a sign of things to come.
On the supply side, permits for new private housing tell a much more interesting story. Unlike the steady growth seen in employment, growth in the number of permits has by and large been on the decline since 2012. Although permit growth is affected by price (declining or lower-than-expected prices might incentivize developers to halt projects) and is at best a leading indicator for supply, declining permit growth coupled with steady employment growth make sense in the context of rising prices and suggest that trend should continue.