How Quickly Will Apartment Rents Start Growing Again?
After the U.S. apartment market turned to rent cuts amid the economic recession of 2020, how long will it take for rents to recover? The answer varies based on whether you’re talking about the nation overall or specific local markets.
At the end of 2020, annual effective asking rents for the nation overall were cut by 1.1%. Moving forward, however, pricing is expected to reach the breakeven point in the last half of 2021, and then growth could return, getting higher than 3% by the end of calendar 2022.But rent change performances were bifurcated across metros in 2020, and that trend is expected to continue in the near term, with some markets far out-performing other locations.
Some markets have already recovered back to pre-pandemic levels, so future rent growth in these areas will take pricing to all-time highs. This group includes some slow-and-steady Midwest region markets, and some Sun Belt spots where building has been restrained.
Less encouraging, rents probably won’t get back to early 2020 levels until 2022 or later in a handful of markets that have seen a lot of new supply of late. This group includes most of the Texas markets, as well as Minneapolis and Nashville.
In the worst cases, RealPage models suggest there is a long way to go in some of the gateway markets, which have been hardest during the COVID-19 pandemic. This group includes the Bay Area, New York, Los Angeles and Chicago. Pricing performances in those markets might not get back to the early 2020 results until 2025 or later.
For more on RealPage’s expectations for the nation’s apartment market in the year ahead, watch the webcast: 2021 U.S. Apartment Market Outlook.