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It stinks to buy a home, but renting is a complete nightmare, too

Published by Business Insider on Sun, 18 Jul 2021


<p><img class="full-bleed" src="https://static3.businessinsider.com/image/60f392fc61b0a1001809bda4-2400/angry-frustrated-woman-laptop-paperwork.jpeg" border="0" alt="A woman who looks angry and frustrated grits her teeth and clenches her hands over a laptop on a table surrounded by paperwork" data-mce-source="skynesher / Getty Images"></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><p class="drop-cap">The pandemic unchained Americans from their office desks and sent rental vacancies in big cities like New York and San Francisco climbing. In an attempt to curb the free fall, <a href="https://www.businessinsider.com/rentals-manhattan-available-august-new-record-high-2020-9">a record share of landlords</a> slashed rent prices and offered <a href="https://www.businessinsider.com/millennials-upgrading-luxury-apartments-new-york-city-low-rents-pandemic-2021-3">concessions</a> like months off rent and waived application fees to lure tenants back in.</p><p>But good luck finding those concessionsor vacanciesnow.</p><p>Average national monthly rent surpassed $1,500 in June for the first time, according to a new release from the <a href="https://www.naahq.org/news-publications/rent-growth-occupancy-demand-near-record-levels">National Apartment Association</a>. Occupancy is also at 96.5%, the highest it's been in 20 years. Rent increases year to date are also starkly higher than in the past: The rental website <a href="https://www.apartmentlist.com/research/national-rent-data">Apartment List</a> found that the median apartment rent in the US rose 9.2% through the first six months of 2021. Typical first-half growth was previously 2 to 3%, Insider's Ben Winck <a href="https://www.businessinsider.com/rent-inflation-housing-market-real-estate-shelter-price-growth-outlook-2021-7">reported</a>, citing Apartment List.</p><p>The frenzy, in part, is because of an overheated real-estate sales market. Millions of Americans have tried to scoop up homes over the past yearand now they're getting completely shut out because of record-low inventory, sky-high prices, and intense competition marked by bidding wars pushing those flush with cash to offer up to <a href="https://www.businessinsider.com/homes-selling-for-1-million-over-asking-amid-frenzied-market-2021-6">$1 million over asking prices</a>. When they're shut out, they have to rent.</p><p>So the competition spills over to the rental market, making apartment hunting feel just as expensive and disheartening as house hunting. When home prices surge, rental prices often follow.</p><p>People "still have to live somewhere," Logan Mohtashami, HousingWire's lead analyst, told Insider. And it's going to get worse, he said: "Rent inflation should pick up."</p><p>The president of the National Apartment Association, Robert Pinnegar, estimated that prices would continue to rise for the next 12 to 18 months.</p><p>It's so bad because demand for rentals is strong: Gen Zers are entering the market looking for apartments after spending the pandemic with family, newly mobile millennial knowledge workers are choosing to rent in lower-cost cities, and baby boomers are offloading homes in a seller's market and downsizing to rentals. There are even bidding wars for rentals now.</p><p>"We've never had three generations in the rental housing space, at least not in the numbers we're seeing now," Pinnegar told <a href="https://www.washingtonpost.com/business/2021/07/09/rent-prices-rising/">The Washington Post</a>.</p><p>Here are three key reasons renters are in such a tough spot.</p><h2><strong>1. Rents in newly popular places are skyrocketing</strong></h2><p>The pandemic inspired about 36 million Americans (according to one <a href="https://www.businessinsider.com/how-many-americans-moved-during-pandemic-housing-real-estate-zillow-2021-4">Zillow estimate</a>) to trade homes in 2020. The reshuffling, fueled by the rise of remote work and desire to live in larger spaces while spending less money, anointed new hot places to live, from <a href="https://www.businessinsider.com/where-to-move-tech-engineers-jobs-austin-pittsburgh-raleigh-madison-2021-6">midsize cities</a> to suburban enclaves and enviable vacation spots like <a href="https://www.businessinsider.com/the-hardest-places-to-buy-a-house-in-the-us-2021-6">mountain towns</a> and <a href="https://www.businessinsider.com/summer-rental-beach-houses-real-estate-hamptons-outer-banks-hawaii-2021-5">beach retreats</a>.</p><p>Consider the <a href="https://www.businessinsider.com/moving-to-arizona-luxury-real-estate-phoenix-scottsdale-paradise-valley-2021-7">on-the-rise</a> Sun Belt spot of Phoenix. Chey Tor, a realtor with Re/Max in the Phoenix area, told <a href="https://www.washingtonpost.com/business/2021/07/09/rent-prices-rising/">The Post</a> that he tried to be realistic with his local clients: "I tell my buyers: It's a terrible time to buy, but it's an even worse time to rent."</p><p><img src="https://static4.businessinsider.com/image/60f1ec2471757b0018c6a2a2-1885/GettyImages-1288752517.jpg" border="0" alt="phoenix" data-mce-source="4kodiak/Getty Images"></p><p>From May 2020 to May 2021, the metro area's rental prices spiked over 15%, one of a handful of cities to see such growth, according to recent <a href="https://www.zillow.com/research/zillow-may-2021-market-report-29635/">Zillow</a> data. Phoenix is so popular that <a href="https://www.businessinsider.com/single-family-rental-investors-squeeze-regular-homebuyers-cerberus-invitation-homes-2021-4">Wall Street firms</a> are even snapping up single-family homes in the area to rent out <a href="https://www.businessinsider.com/blackstone-jon-gray-real-estate-inflation-rent-growth-earnings-q1-2021-4">at a profit</a>. It's getting unaffordable: Renters need to make $24.06 an hour to afford a two-bedroom apartment, but the average local renter makes only $18.12 an hour, according to the <a href="https://nlihc.org/sites/default/files/oor/2021/Out-of-Reach_2021.pdf">National Low Income Housing Coalition</a>.</p><p>Ritzy suburbs where it's more common to own a luxe mansion are seeing surges in rental interest, too. Take Greenwich, a posh Connecticut town about an hour outside New York City, for example. Wealthy Wall Street types <a href="https://www.businessinsider.com/living-in-greenwich-connecticut-houses-cars-wall-street-photos-2019-3">decamped</a> to Greenwich in droves amid the pandemic. <a href="https://www.cnbc.com/2020/05/15/gov-ned-lamont-people-could-move-from-new-york-city-to-connecticut.html">In May last year</a>, the state's governor said that "phones are ringing off the hook at real-estate agent offices." But outsize demand has <a href="https://www.tiktok.com/@kmwalker588/video/6981486962662313221'_d=secCgYIASAHKAESMgowil6de7tyLU%2BkvXWsZERnwhnIGPM1r4296KtGd2ArPKl5zS6xt9vAllC5JAbvO%2BFsGgA%3D&amp;checksum=e92f64bf62c71d0388ca1a9926b58e51bd4c82cf91f6e07b4d26568db05c0a30&amp;language=en&amp;preview_pb=0&amp;sec_user_id=MS4wLjABAAAAZHB9nq6mTszbH9nIidgN9FibWp2JiqS4SeOLzIol0u4aE76Gie61s9VhPtGNSNJl&amp;share_app_id=1233&amp;share_item_id=6981486962662313221&amp;share_link_id=7F9B4704-01B1-49EB-9334-D3092E1A753A&amp;source=h5_m&amp;timestamp=1626119298&amp;tt_from=more&amp;u_code=da7e3kd4k4bbi3&amp;user_id=6778875603619218437&amp;utm_campaign=client_share&amp;utm_medium=ios&amp;utm_source=more&amp;_r=1">pushed prices of dwindling inventory</a> ever higherand so those house hunting in one of <a href="https://www.businessinsider.com/richest-towns-in-the-us-2019-2">America's richest places</a> are making the phones at leasing agent offices ring off the hook as well.</p><p>One new local luxury rental development, <a href="https://www.themillgreenwich.com/">The Mill</a>, has yet to even open its doors but has fielded over 1,000 inquiries for just 59 apartments ranging from $2,750 to $13,000 a month. Apartments at all price points have been leased for late-summer move-in dates, and there are just 10 remaining units. The developer has already raised rents and is not offering incentives to prospective residents.</p><h2><strong>2. Big-city returners are fighting over apartments</strong></h2><p>While sales and rental markets in more suburban and midsize cities flourished amid the pandemic, markets in the country's biggest and priciest cities, like New York City and San Francisco, slowed.&nbsp;</p><p>That lull is ending.</p><p>As the US recovers from the pandemic, many are pouring back into those coastal hubs, looking for coronavirus-crisis-level concessions and slashed rent pricesbut not finding them.</p><p>Landlords are retiring months of free rent and other enticing incentives in New York City, according to <a href="https://www.millersamuel.com/reports/elliman-report-manhattan-brooklyn-queens-rentals-6-2021/">a new report</a> from the brokerage Douglas Elliman and the real-estate consulting and appraisal firm Miller Samuel.&nbsp;</p><p>Manhattan rentals offering incentives tumbled to just 38% last monthfar below the peak of 60% in October. The average concession in June, according to Miller Samuel, was 1.9 months off of rent, the lowest level since August. New leases themselves were up 204.1% year over year. Vacancies, which had reached record highs, are declining again.</p><p>The chief operating officer of the brokerage Corcoran Group, Gary Malin, told <a href="https://www.bloomberg.com/news/articles/2021-07-14/manhattan-s-apartment-rebound-means-sweet-deals-are-fading-fast'sref=BLKWHazc">Bloomberg</a> that the New York rental market was the busiest he'd ever seen.</p><p>"You're seeing people sometimes getting bidding wars, you're seeing people have rents changed on them right away, you're seeing apartments rented before they even show up at the appointment," he said.</p><p><img src="https://static4.businessinsider.com/image/60f1edb37b0ec5001800a97b-2400/GettyImages-619686160.jpg" border="0" alt="Apartments at dusk on the Upper West Side in Manhattan" data-mce-source="Paris Jefferson/Getty Images" data-mce-caption="While New York City apartment vacancies hit highs and rents hit lows amid the pandemic, occupancy and prices are resurging."></p><p>You likely don't need to look further than your own social-media feeds to see the evidence.&nbsp;</p><p><a href="https://www.tiktok.com/@i.dan.ya/video/6981895485976038661'sender_device=pc&amp;sender_web_id=6952894952524236293&amp;is_from_webapp=v1&amp;is_copy_url=0">One TikTok</a> video posted last week and viewed over 100,000 times features one Manhattan apartment hunter inquiring about a $5,250 three-bedroom, two-bathroom unit in the East Village, only to be told by a leasing agent that the rent increased by $1,550 "due to the enormous amount of interest" in the dwelling. <a href="https://www.tiktok.com/@kmwalker588/video/6981486962662313221'_d=secCgYIASAHKAESMgowil6de7tyLU%2BkvXWsZERnwhnIGPM1r4296KtGd2ArPKl5zS6xt9vAllC5JAbvO%2BFsGgA%3D&amp;checksum=e92f64bf62c71d0388ca1a9926b58e51bd4c82cf91f6e07b4d26568db05c0a30&amp;language=en&amp;preview_pb=0&amp;sec_user_id=MS4wLjABAAAAZHB9nq6mTszbH9nIidgN9FibWp2JiqS4SeOLzIol0u4aE76Gie61s9VhPtGNSNJl&amp;share_app_id=1233&amp;share_item_id=6981486962662313221&amp;share_link_id=7F9B4704-01B1-49EB-9334-D3092E1A753A&amp;source=h5_m&amp;timestamp=1626119298&amp;tt_from=more&amp;u_code=da7e3kd4k4bbi3&amp;user_id=6778875603619218437&amp;utm_campaign=client_share&amp;utm_medium=ios&amp;utm_source=more&amp;_r=1">Another viral TikTok</a> video posted last week by a different Manhattan apartment hunter showcased a line 80 people deep for an open house of a $2,950-a-month two-bedroom apartment in the neighborhood of Chelsea. The video has been viewed over 3 million times.&nbsp;</p><p>Meanwhile, it seems like tech workers are returning to San Francisco as offices slowly <a href="https://www.businessinsider.com/leaked-memo-google-is-reopening-its-california-offices-next-month-2021-6">reopen</a>.</p><p>"I think people were pretty noisy about quitting the Bay Area," Eric Bahn, a cofounder of the Silicon Valley investment firm Hustle Fund, told <a href="https://www.nytimes.com/2021/07/15/technology/tech-workers-bay-area-back.html">The New York Times</a>. "But they've been very quiet in admitting they want to move back."</p><p>Rents near the city's financial district dropped over 20% in 2020, The Times reported, citing Zillow data, but they're going back up. That same area had the biggest spikes in rent price in the first half of 2021.</p><h2><strong>3. Renting a house is also more expensiveand benefits Wall Street</strong></h2><p>Even as the allure of urban environments creeps back into the American psyche, the dream of living in a single-family home persists. The pandemic pushed many to realize the value add of sheer space, like an extra room for a home office, separate space for children attending school remotely, or a backyard for private access to the outdoors.</p><p>If the market is <a href="https://www.businessinsider.com/too-late-to-buy-a-house-coronavirus-pandemic-2021-5">too frenzied to buy</a> a big enough place, people are willingor forcedto rent. A May <a href="https://www.businessinsider.com/rent-inflation-single-family-homes-housing-corelogic-real-estate-prices-2021-5">CoreLogic survey</a> of consumers found that nearly 70% of respondents cited high home inflation as a reason to rent over buy, even though more than one-third of respondents also said rentals in their areas are not affordable.</p><p>As a result, the single-family-rental market is booming. The cost of renting a single-family home rose 4.3% year over year in March, which placed rents at their highest level since September 2006, according to a June <a href="https://www.corelogic.com/press-releases/single-family-rent-growth-rate-more-than-doubles-year-over-year-in-april-corelogic-reports/">CoreLogic</a> report.&nbsp;</p><p>This is good news for large-scale investors, such as <a href="https://www.businessinsider.com/real-estate-investing-reits-cities-blackstone-jon-gray-2021-6">Blackstone</a> and <a href="https://www.businessinsider.com/blackrock-wall-street-investors-buy-homes-neighborhoods-single-family-rental-2021-6">Invitation Homes</a>, that have been beating out everyday Americans in bidding wars by offering cash and skipping due diligence to buy homes <a href="https://www.businessinsider.com/wall-street-single-family-rental-build-to-rent-houses-finance-2021-7">to rent out at a profit</a>. The brokerage Redfin found that investors purchased <a href="https://www.businessinsider.com/investors-corporations-buy-houses-single-family-homes-redfin-2021-5">a record $77 billion</a> worth of homes during the fourth quarter of 2020 and the first quarter of 2021.</p><p>They're expecting large returns.</p><p><img src="https://static2.businessinsider.com/image/60f1ee8b7b0ec5001800a983-2400/GettyImages-563977367.jpg" border="0" alt="Invitation Homes executives touring a company property in the Los Angeles area in 2013" data-mce-source="Mel Melcon/Los Angeles Times via Getty Images" data-mce-caption="An Invitation Homes property for rent in the Los Angeles area."></p><p>Jon Graythe chief operating officer of Blackstone, one of the largest landlords in the countrysaid in <a href="https://www.businessinsider.com/blackstone-jon-gray-real-estate-inflation-rent-growth-earnings-q1-2021-4'render-embed=video">an April earnings call</a> that the firm owned and managed industrial, residential, and retail properties across the US but that rental housing represented one of the pillars of its portfolio.</p><p>He said on the call that he was considering preparing for inflation by raising rents on the thousands of apartments and homes the private-equity giant owns. While the firm does not disclose how many multifamily units it owns in total, a fact sheet for its Blackstone Real Estate Income Trust showed the company had at least 89,000 multifamily units.</p><p>Hikes like these make the rental market even more unaffordable for Americans already struggling to pay rent.</p><p>A <a href="https://nlihc.org/sites/default/files/oor/2021/Out-of-Reach_2021.pdf">new report</a> from the National Low Income Housing Coalition found that people earning minimum wage could afford rent in only 218 of more than 3,000 counties nationwide. Even before the pandemic, there were only 37 affordable and available rental homes for every 100 renter households with low incomes.</p><p>Meanwhile, about 7 million people in the country are behind on rent payments, according to a <a href="https://www.census.gov/data/tables/2021/demo/hhp/hhp30.html">US Census Bureau survey</a> released in June. And <a href="https://www.businessinsider.com/biden-admin-extends-nationwide-ban-evictions-for-final-month-2021-6">the end of the nationwide eviction moratorium</a> looms.</p><p>Come August, the only place with free rent will your mind, where TikTok videos about bonkers housing will playing over and over.</p><p><a href="https://www.businessinsider.com/rents-increasing-new-york-phoenix-greenwich-single-family-homes-2021-7#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="https://www.businessinsider.com/movie-theaters-ruining-masking-curtains-projector-bulb-brightness-2018-7">Hate going to the theater' Here's how theaters are ruining the movie-going experience</a></p>
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