Chart 1 shows year-over-year increases in rental rates as of Jan-22. 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 rent increases for apartments in multi-unit buildings.
There are many reasons for this amazingly strong growth:
Rising, but historically low mortgage rates
Need for more space due to the pandemic
Migration out of high-priced, drought stricken California.
Stock market gains
Millennials moving into their child bearing age and trying to get out of their parent’s houses.
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. Chart 2 shows that in major CBSAs, like Los Angeles, 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.
This suggests that renters in other cities may continue to pay up to live where they are living or chose to rent a smaller property.