Higher home interest rates fired up the national rental market in September, as home rental demand jumped 19.2% year over year, according to a report from Zillow.
The Zillow Observed Renter Demand Index (ZORDI), which tracks rental demand nationwide, registered the nearly 20% increase as elevated borrowing costs pushed potential homebuyers into the rental market. Zillow found the cost of homebuying rose at nearly twice the general rate of renting.
The typical rent nationwide in September was $1,932 a month, up 2.7% from a year ago. The typical cost of renting a home was $2,266 a month, up 3.1% year over year. At the same time, the typical costs of buying a home rose 5% to $3,037 per month, showing that buying a home averages $771 more per month than renting.
Despite the increased cost, there remains a strong preference for single-family homes. Demand for single-family rentals rose 21.6% from a year ago, more than doubling the 10.1% increase in demand for multifamily rentals.
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Rental demand increased the most in fast-growing areas with strong job markets. Topping the list in September was San Jose, Calif., where the ZORDI was up 82.5% from a year ago. It was followed by nearby San Francisco, which saw that indicator of rental demand rise 66.9%. Austin, Texas, experienced a 49.3% jump, followed by Miami at 48.9% and Phoenix at 43%.
Rents in September were up year over year in 49 of the nation’s 50 largest metropolitan areas, Zillow reported. Rent growth was strongest in the Bay Area, where typical rents were up 11.8% in San Francisco and 8.3% in San Jose. Virginia Beach, Va., experienced a 7.1% jump; Milwaukee, Wis., was up 5.1%; and Chicago rose 4.7%.
Single-family home rents also increased the most in the Bay Area, with San Jose topping the list at 7.4%. It was followed by San Francisco (6.7%), Providence, R.I. (5.8%), Hartford, Conn. (5.6%) and Virginia Beach (5.3%).
Some markets saw rental demand fall, such as Louisville, Ky., where interest in renting dropped by 6.2% year over year. Baltimore experienced a rent demand decline of 6.1%, while Washington, D.C.’s rent demand fell 5.6%.
