Higher housing prices signal return to pre-pandemic pace

The amount of money Americans are spending on housing is rising rapidly in cities across the country as the U.S. recovers from the coronavirus downturn, suggesting the nation is returning to something of a pre-pandemic normal.

Median rents across all types of homes have grown 5.4 percent over the past 12 months, according to Apartment List, which monitors rent costs nationwide. The firm estimates that, after a rental swoon through most of the pandemic-plagued year of 2020, costs are now back in line with where they would have been had COVID-19 never emerged.

At the same time, home prices are climbing to new records. The typical U.S. home value rose 11.6 percent over the past year, according to real estate firm Zillow, and a record 1.3 percent in the last month alone.

The recovery from the early months of the pandemic, when Americans sheltered in place against the onslaught of the coronavirus, has been uneven. Through most of last year, rents and home prices grew faster in both suburban areas and in cities that are not often considered mega metro areas, like Cleveland, Cincinnati and St. Louis.

Home sales in the hardest-hit cities remain below pre-pandemic levels; house prices and rents in San Francisco, for example, are respectively 2.8 percent and 17 percent below March 2020, according to Zillow and Apartment List.

But those big cities are roaring back. Rent prices in May spiked more than 4 percent in Boston, Chicago and New York and by almost that much in San Francisco and Seattle.

“In markets like San Francisco where rents had been falling fastest, prices have turned a corner and are now rebounding,” economists Chris Salviati, Igor Popov and Rob Warnock wrote for Apartment List. “We may be seeing the release of pent up demand from renters who had been delaying moves due to the pandemic. Whereas last year’s peak moving season was halted by the pandemic, this year’s seasonal spike appears to be making up for lost time.”

The lower-tiered cities, especially those that are suburbs of major metropolitan areas, continue their explosive growth. Rent prices are up more than 15 percent in Mesa, Glendale, Gilbert and Chandler, Ariz., — all suburbs of Phoenix. Compared to March 2020, rents are up the most in places like Boise, Idaho, with a 31 percent spike, and Spokane, Wash., at 22 percent.

That data suggests that while Americans might have been looking to move out of urban centers, they weren’t planning to move very far from their places of work. White-collar workers anticipate working from home more often than before the pandemic, and data from the U.S. Bureau of Labor Statistics show that many still are — but they also anticipate going back to the office for at least a few days a week once the country returns to normal.

“There’s a lot of potential disruption occurring within or right around big coastal metros, because there does seem to have been movement outwards,” said Mark Muro, policy director at the Brookings Metropolitan Policy Program. “There’s movement within and to the near beyond of the big metros. What there is not is huge numbers of long distance moves into the Heartland.”

The Washington metropolitan area shows some of the clearest examples of the modified behavior changes since the pandemic emerged. Rents in the nation’s capital rose 6.6 percent between May 2020 and May 2021 — but those rents grew faster in Virginia suburbs like McLean, up 13.7 percent, and Arlington, at 10 percent, followed by Reston’s 9.5 percent and 9.3 percent in Fairfax. Other Virginia suburbs like Tysons Corner and Leesburg, as well as Columbia, Md., also grew faster than Washington.

Government data shows 30 percent of Americans who hold white-collar management or professional jobs worked from home last month because of the coronavirus pandemic, almost half the 57 percent who reported doing so a year ago and down from 41 percent at the beginning of 2021.

“Remote work is slipping back. It won’t go all the way back to where we were, but it was half the level it was last May,” Muro said. “Many more people, say professional people, are winding up back in the office or spending more time in the office.”

Both the hot rental market and the booming home sales market are benefiting from a sharp squeeze in inventory, the Apartment List and Zillow data show. Zillow reported that the median homeowner who listed their property in April accepted an offer in just seven days, far faster than has been normal in recent years.

The inventory of unsold homes on the market in April dropped below 1 million, just over half of recent peaks in August 2019 and 2018. By comparison, there were 1.4 million homes on the market in April 2020 and 1.57 million for sale in April 2019.

Zillow said April’s explosive 1.3 percent jump in home values was the largest one-month increase in the 25 years it has tracked housing data. The year-over-year growth rate for April was the fastest since 2005.

Home prices have risen faster in Sun Belt and Southwestern metro areas than in Northern and Midwestern cities. In the last year, the median home in Austin has appreciated by more than 25 percent, in Phoenix by 20 percent and in Salt Lake City by 18 percent.

Prices are rising even faster in Idaho, home of some of the nation’s hottest real estate markets. Homes in Eagle, Tampa, Caldwell, Boise and Meridian have all surged more than 30 percent over the past year.

There are few signs that the real estate boom will slow any time soon. Zillow expects annual home values to grow almost 14 percent over 2021, and by nearly 12 percent through next year’s spring selling season.