Apr-22: The U.S. Rental Market

30 Apr 2022

Action by the Federal Reserve to slow the economy have led to a rise in the 30-year fixed rate mortgage (FRM) as of month’s​​ end​​ Apr-22​​ to 5.10%. This an increase of​​ 203​​ bps since Nov-21​​ when the FRM was 3.07%. Concurrently, the year-over-year home price changes for the 20 CBSAs​​ tracked by this report​​ (the CHTR 20-city index)​​ show no signs of slowing down. The year-over-year HPA in Mar-22 was 18.24%.​​ The Case-Shiller 20 city home price index increased for Feb-22​​ by 20.2%. Fear of additional mortgage rate increases and the stock market gains from 2021 have kept the demand for SFR homes very strong. Evidence also indicates that homebuyers are adjusting by switching to adjustable-rate mortgages, moving away from expensive coastal cities, or looking to more affordable suburbs.


More importantly for this report is that fact that rental rates on apartments in multi-unit structures show also show no signs of slowing down (14.37% YOY).​​ Alternatively, rents on detached properties are moving up at a much slower pace. Table 1 shows the mortgage rate increases up to month end Mar-22 and the rent increases for Feb-22.​​ 

The table, however, does not show that as of Apr-22, the 30-year FRM rate rose by an additional​​ 93​​ bps to 5.10​​ percent. The impact to housing of higher rates will likely overwhelm the forces which have propelled such strong HPA for the past two years.


To get a micro-sense of how rents are changing, Chart 1 shows the year-over-year increases in rental rates as of Mar-22 for our 20 CBSAs. The chart shows that rents in the warm states of Florida, Texas, Arizona and Nevada grew at exceedingly high rates. The striped bars show the very strong rent increases for apartments in multi-unit buildings.

There are many reasons for the amazingly strong home price growth we see in Table 1:

  • Rising, but still historically low, mortgage rates

  • People rushing to buying homes before rates go up even more

  • A need for more space due to the pandemic​​ and working from home

  • Migration out of high-priced, drought-stricken California.

  • Earlier stock market gains

  • Millennials moving into their child bearing age and trying to get out of their parent’s houses.


The causes of the increases in rents for​​ apartment dwellers we see in Table 1 and Chart 1 are less understandable. The reasons might be:

  • Apartment renters might have low incomes (but some renters in major CBSAs are high-incomes) and have a lack of alternatives

  • Vacancy rates are low, despite the increased purchases of homes


Individual CBSA rental markets:

How many more months that these strong numbers last depends whether renters can afford these increases? The rule of thumb is that a household should allocate about 30 percent of income to shelter. To answer this question, we show two additional charts below. The first (Chart 2) is for three bedroom detached properties and the second (Chart 3) is the data for apartment rental (all unit sizes) in multi-unit buildings.​​ 

Chart 2 shows that in major CBSAs, like Los Angeles, CA, New York, NY and San Francisco, CA renters are willing to allocate more than 50 percent of their income to renting a three-bedroom property.​​