Story at a glance
- The combined effects of the COVID-19 pandemic and inflation have contributed to large gains in U.S. rent prices.
- A new report from Realtor.com found that although still cheaper than urban areas, suburban rents are higher now than they were prior to COVID-19.
- However, landlords adjusting prices for inflation may signal a future market cool down.
The COVID-19 pandemic saw a resurgence in the popularity of suburban living. But a new report from Realtor.com shows the decision to exit city living for a less crowded life is not as cheap as it once was.
According to the company’s July Rental Report, renting in suburbs is less affordable compared with renting in the city now than it was before COVID-19.
“In July of 2019, urban rent was 12.4% higher than suburban rent nationally, while that premium slipped to 4.9% in the peak of suburban rent growth in July 2021 and has just ticked back up to 5.8% this July,” Realtor.com said.
The analysis also revealed renters saw a $160 increase in rent per month on average when renewing leases this year in addition to a $360 increase per month on new leases.
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Compared with three years ago, the rental price advantage of suburban living vs urban living decreased by nearly 53 percent, or $68 per month, the report found.
July of 2022 also saw the highest U.S. median rental-price of all time at $1,879 per month and national rents remain at historic highs, regardless of urban or suburban areas.
However, recent survey results suggest the market may be cooling as landlords adjust renter budgets for inflation, which currently stands at 8.5 percent.
“Whether in a downtown area or suburb, staying put or making a change, renters are stuck between a rock and a hard place when it comes to affordability,” said Realtor.com chief economist Danielle Hale in a statement.
Hale credits a rise in remote work to the surge in demand for suburban rentals.
“At the same time, the days of smaller premiums for downtown rentals are numbered, as a return to in-office work and city life is sparking a relative uptick in urban rent growth. Put simply, renters are feeling it everywhere, but there may be some relief ahead,” she said.
The analysis also found vacancy rates in July were low while inflation rates outpaced wage growth. Rent totals in urban areas are slightly outpacing those of suburban regions, at a 12.8 percent increase vs 11.7 percent, respectively.
Increases in July rent growth were concentrated in metros throughout the South and Northeast, particularly hubs like Miami, New York, Boston and Chicago.
To carry out the analysis, researchers defined urban vs suburban areas based on zip codes within each metro and categorized percentiles of population density within the metro.
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