Rents grew by 0.1 percent this month nationally, the fourth straight month that growth has slowed after peaking at 2.7 percent in July. This represents the smallest month-over-month growth rate that we’ve recorded in 2021. A slowdown in rent growth during the fall and winter is typical due to seasonality in this market, but this year the seasonal slowdown is capping a year that has been characterized by unprecedented price increases. For seven months from March through September, month-over-month rent growth exceeded the pre-pandemic record going back to 2017. And while this month’s growth rate was essentially flat, it’s worth noting that we normally see rent prices decline in November. In the pre-pandemic years from 2017-2019, rents fell by an average of 0.5% from October to November.
This appears to be the normal seasonal slowdown in rent increases.
Today, I’m going to update some of the data that shows rents are accelerating. Here is a graph of several measures of rent since 2000: OER, rent of shelter, rent of primary residence, Zillow Observed Rent Index (ZORI), and ApartmentList.com. (All set to 100 in January 2017)
OER, rent of shelter, and rent of primary residence have mostly moved together. The Zillow index started in 2014, and the ApartmentList index started in 2017. Here is a graph of the year-over-year (YoY) change for these measures since January 2015. All of these measures are through October 2021 (Apartment List through November).
The Zillow measure is up 11.2% YoY in October, up from 10.3% YoY in September. And the ApartmentList measure is up 17.7% as of November, up from 16.9% in October. Both the Zillow measure (a repeat rent index), and ApartmentList are showing a sharp increase in rents. From Zillow:
“ZORI is a repeat-rent index that is weighted to the rental housing stock to ensure representativeness across the entire market, not just those homes currently listed for-rent.”
And from ApartmentList:
At Apartment List, we estimate the median contract rent across new leases signed in a given market and month. To capture how rents change in a market over time, we estimate the expected price change that a rental unit should experience if it were to be leased today.
Both of these measures reflect new leases, whereas most rental units don’t turnover every year (as captured by the BLS measures). Adam Ozimek, Chief Economist at @Upwork explained this succinctly:
CoreLogic … today released its latest Single-Family Rent Index (SFRI), which analyzes single-family rent price changes nationally and across major metropolitan areas. September 2021 data shows a national rent increase of 10.2% year over year, up from a 2.6% year-over-year increase in September 2020. …
“Single-family rental vacancy rates remained near 25-year lows in the third quarter of 2021, pushing annual rent growth to double digits in September,” said Molly Boesel, principal economist at CoreLogic. “Rent growth should continue to be robust in the near term, especially as the labor market improves and the demand for larger homes continues.”
The 10.2% YoY in September was up from 9.3% YoY in August.
Clearly rents are increasing sharply, and we should expect this to spill over into measures of inflation in 2022. The Owners’ Equivalent Rent (OER) was up 3.1% YoY in October, from 2.9% in September - and will increase further in the coming months.
