Annual growth in median rents nationwide have slowed from last summer’s extreme pace. But according to the Zillow Rent Forecast, just because rental growth is slowing down, doesn’t mean it’s not still expected to grow in some of the nation’s hottest markets, contributing to continued affordability concerns.
The Zillow Rent Forecast reveals that markets in which technology jobs are especially prevalent, such as Seattle, Denver and the San Francisco Bay Area, will continue over the next year to be on the forefront of rental growth.
The report forecasts U.S. rents to grow by 1.7 percent through August 2017, to a Zillow Rent Index of $1,429 per month. Zillow notes that among the 35 largest metro markets, rents are expected to grow the fastest over the next year in Seattle by 7.2 percent, Portland by 6 percent, Denver by 5.9 percent, Cincinnati by 5.2 percent, and San Francisco by 4.9 percent. This continues a recent trend seen in August where Seattle and Portland led all large markets in annual rental appreciation, according to the Zillow Real Estate Market Report.
Based solely on monetary value, the report shows that the two Bay Area metro markets of San Jose and San Francisco, remain the most expensive large rental markets in the country, by a landslide. The amount renters in and around San Jose should currently spend is about $3,517 per month. For the San Francisco area, median rent runs roughly $3,406 per month. In looking at the next highest priced rental market though, Los Angeles came in at approximately $2,593 per month.
Zillow forecasts that in the next year, these multi-county areas will still continue to be ranked among the nation’s priciest and if rents rise as expected, by the end of next summer renters in San Francisco should expect to budget $3,573 per month. For those in San Jose, a median rent is expected to rise to $3,677 and for renters in Los Angeles the median price to rent is anticipated to be close to $2,718 per month.
Continued rapid growth in rents will ensure that rental affordability concerns remain an important issue going into 2017. Despite this, Zillow notes that recent strong gains in income growth will help keep rental affordability and the share of income devoted to rent each month in check.