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Suburbs surpass urban areas in rent growth


Housing rent increases in suburban markets across the U.S. are, for the first time in four years, outpacing rent bumps in urban areas, a new study by real estate services company Zillow shows.

The reversal in the rental-rate pattern is attributed to a rising demand for rental units in suburban areas in reaction to the high cost of urban rentals, while new multifamily construction in the nation’s urban cores, also a response to demand patterns, is having a moderating impact on rent increases in those locations.Apartments

“Because walkable urban centers close to amenities are typically a big draw for renters, you’d expect rents to rise faster in the city than in the suburbs — which is exactly what we’ve been seeing, until very recently,” Zillow Chief Economist Dr. Svenja Gudell says. “But a handful of factors are helping turn the tables and beginning to push suburban rents up at a higher clip.

“These include deteriorating rental affordability in expensive urban cores; new apartments, albeit high-end ones, opening downtown compared to relatively few in outlying areas; and preferences among some renters toward the space offered by single-family homes in the suburbs.”

Gudell stresses, however, that rents, in absolute terms, are still lower in suburban markets than in urban areas, but he adds that if demand continues to increase for suburban rentals, and new multifamily supply lags, “that will start to change.”

“As more formerly urban renters move to the suburbs in coming years, we’ll likely start seeing more apartment buildings and walkable amenities popping up in those communities,” Gudell says.

As of this past March, based on Zillow’s analysis of U.S. markets, the median monthly suburban-rental cost was up 2.5 percent year over year. The median monthly urban-rental price, by contrast, was up by 2.3 percent.

As of the same period last year, the figures were reversed on a year-over-year basis, with the median urban-rental price up by 5 percent and the median suburban-rental price up by 3 percent.

The trend of suburban-rent increases outpacing urban-rent increases is more pronounced in cities with hot housing markets, like San Francisco, Seattle and Nashville, Tennessee, Zillow reports.

In Nashville, for example, the median monthly price of a suburban rental is about $500 less per month than for an urban rental. Still, the median monthly rent for a suburban unit, as of this past March, was up nearly 5 percent year over year. By comparison, the median monthly rent for an urban abode in the Nashville market was up by only 1.7 percent over the same period.

Overall, rents in Seattle are increasing strongly across the metro area, but as of this past March, year over year, the growth in the median monthly rent in the suburbs was outpacing the city’s urban rental-price growth by about 2 percentage points, Zillow found. The median monthly rent-growth divergence is even more pronounced in San Francisco, where urban rents for the period were down by 0.4 percent while suburban rents shot up by 2.6 percent.

The median rental price of a suburban rental unit in both the Seattle and San Francisco metro areas, however, is still about $350 less per month than for an urban rental, Zillow reports.

Bill Conroy is managing editor at Scotsman Guide Media. He can be reached at billc@scotsmanguide.com.










 

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