(BLOOMBERG) - Soaring prices. Competition. Desperation. The dramatic conditions for US home buyers during the past year are now spilling into the market for rentals.
Landlords from Tampa, Florida, to Memphis, Tennessee, and Riverside, California, are jacking up rents at record speeds. For each listing, multiple people apply. Some renters are forced to check into hotels while they hunt after losing out too many times.
"Any desirable rental is going within hours, just like the desirable sales," said Ms Shannon Dopkins, a Realtor in Tampa. "One woman passed up on a place that was beat up with water damage. Somebody else decided to rent it."
After weakening early in the coronavirus pandemic as the economy faltered and young people rode out lockdowns with family, the rental market is now seeing record demand. Rents on new leases surged 17 per cent in July compared to what the prior tenant paid, reaching the highest level on record, according to RealPage.
The gains reflect competition for a resource that's getting harder to obtain: a place to live. With prices soaring in the for-sale market, and bidding wars proliferating, would-be buyers on the losing end are being forced back into rentals.
At the same time, young people looking for their first apartment are competing with others who delayed plans because of Covid-19. Remote workers - and their high pay cheques - are on the move to lower-cost areas. And small single-family home and condo landlords, tempted by high prices, are cashing out, leaving their tenants desperate for another place.
"The housing market is on fire - from homeownership to rental, from high-end to low-end, from coast to coast," said Moody's Analytics' economist Mark Zandi.
Developers are adding new supply. But in the short run, the squeeze will have economic consequences because workers can't easily move for jobs and will have less to spend on things other than housing. Soaring rental costs also are a contributor to the Federal Reserve's inflation expectations.
The soaring demand is most pronounced in Sun Belt cities that have seen an influx of arrivals from the pandemic. The Phoenix area had the United States' biggest rises in rents for single-family houses in June, with an almost 17 per cent surge from a year earlier. It was followed by Las Vegas, with a 12.9 per cent gain; Tucson at 12.5 per cent; and Miami, up 12.4 per cent.
It's a reversal from the pre-pandemic norm of tight housing in denser, pricier cities - places such as New York, Boston and San Francisco, which saw office workers flee during lockdowns. Those areas still have an overhang of inventory of high-end apartments aimed at white-collar professionals. Still, demand is picking up.
Migration away from the pricey locations also is driving up housing costs for locals, especially those in more affordable cities and in far-flung suburbs. The average income for new lease signers in July hit a record of US$69,252 (S$93,885), according to RealPage, which captured data for professionally managed buildings. Year-to-date, their incomes shot up 7.5 per cent.
"It's always been hard to find a home if you have limited income," said Mr Jay Parsons, deputy chief economist for RealPage. "What's crazy now is you can have a relatively high income and still have a hard time."
Ms Nicolle Crim, vice-president of Watson Property Management's Central Florida unit, said she wished she had more to offer. But the for-sale market is so strong that owners are selling for big profits. As a result, Watson now manages about 4,000 single-family home rentals for individual owners, down by a third since the pandemic began, she said.
Even relatively sleepy areas such as Springfield, Illinois, three hours from Chicago, are experiencing shortages. Landlord Seth Morrison said his only apartment listing attracted a couple dozen calls before he took it down.
"We have 270 units and we don't have any open," Mr Morrison said. "In a city like Springfield, in a state like Illinois, to have this sort of demand is just crazy."