- Zero Flux
- Posts
- Zillow’s Rental Market Report
Zillow’s Rental Market Report
Today’s Ad
-
Simplify your fundraising process
Close more deals, faster
Raise more equity
Track soft commitments
Accelerate your fundraising processes
New here? Join the newsletter (it's free).
Macro Trends
Rising Consumer Demand Boosts North American Cargo Volume link
Cargo container volume at 14 major North American ports rose by 11% year-over-year in Q2 2024, with East Coast ports seeing a 12% increase. Retail sales also grew by 2.5% during the same period, driving this demand.
Lázaro Cárdenas, Mexico, led with the highest year-over-year container volume increase of 33.2%, indicating the impact of supply chain diversification and nearshoring strategies. Montreal was the only port with a year-over-year decline in volume.
The industrial vacancy rate for U.S. seaport markets increased to 5.7%, up by 60 basis points quarter-over-quarter. Port markets with the most year-to-date net absorption included Dallas (11 million sq. ft.) and Houston (10.1 million sq. ft.).
Real Estate Trends
Warehouse cap rates climb in Q2 link
Warehouse cap rates rose to 6.42% in Q2, with the East region experiencing the highest increase at 6.92%. The Central region had the smallest rise, reaching 7.13%.
E-commerce and supply chain needs continue to drive demand, especially in cities like Charlotte, Miami, Boise, and Phoenix. Despite this demand, some markets like Chicago, Indianapolis, Dallas, and Los Angeles face higher vacancy rates due to speculative development.
Nationwide, warehouse properties saw a 3.06% market rent increase to $7.57, with the East region leading rent growth for flex properties at 3.88%. The West had the largest vacancy rate increase for warehouses, jumping by 247 basis points to 6.49%.
Zillow’s August 2024 Rental Market Report link
Rents rose by 0.2% from July to August, with the typical U.S. asking rent reaching $2,063. However, this is a modest increase compared to the last two years, with year-over-year growth stabilizing at 3.4%.
In August, over a third (34.3%) of rental listings offered concessions like free rent or parking, the highest rate since March 2021. Despite these incentives, median household spending on rent remains high at 30% of income, up from 28.5% pre-pandemic.
The income needed to afford the typical U.S. rent has surged by 31.8% since 2019, now standing at $82,514. This rise in required income indicates ongoing affordability challenges, even as rental demand softens and new multi-family constructions become available.
High-Supply Multifamily Markets Begin to Recover link
High-supply multifamily markets have faced significant negative rent growth, with nearly 70% of inventory affected in Q2 2024. However, occupancy rates have stabilized as renter demand has absorbed much of the new supply.
Rent growth is expected to rebound soon, as demand is now starting to outpace new supply in several markets, including downtown areas of Atlanta, Austin, Orlando, and Phoenix. This shift is leading to increased occupancy rates and a slowdown in rent discounts, especially in Sun Belt and Mountain regions.
By mid-2025, most high-supply markets are projected to see positive rent growth and stable vacancy rates, except Austin, where a sharp increase in suburban supply may delay recovery until Q3 2025. Multifamily property values have stabilized, with further growth expected as interest rates potentially fall.
Where coworking is cheaper than a traditional office.
Coworking memberships for a team of 10 are more affordable than traditional office leases in over 97% of the 102 cities studied. In 17 of the top 20 cities, coworking is less than half the cost of a traditional office lease.
Silicon Valley cities like Sunnyvale, CA lead with coworking spaces being 70% cheaper than office leases, resulting in over $103,000 in annual savings. Palo Alto and Menlo Park also offer savings of over $100,000 per year.
Miami, FL ranks fifth nationally, offering a 61% price gap in favor of coworking, translating to more than $70,000 in yearly savings. Meanwhile, Midwestern cities like Bloomington, MN provide an average 43% savings, amounting to over $23,700 annually.
Something I found Interesting
Demand for second-home mortgages falls to eight-year low link
Mortgage-rate locks for second homes have dropped by 13.1% year-over-year in August, hitting their lowest since March 2016. This decline is more than twice that of primary homes, which fell by 5.2%.
High prices and economic concerns are deterring second-home buyers, with the typical home in seasonal towns costing $589,162, compared to $437,787 in non-seasonal towns. Many potential buyers opt for cash purchases to avoid high mortgage rates.
The rental market slowdown and stricter short-term rental regulations have made second-home investments less appealing. Revenue for owners of short-term rentals like Airbnb has declined, reducing demand for second homes.
Pro Member Only Content Below
New York City transaction volume poised to rise: here’s the opportunity
(This content is restricted to Pro Members only. Upgrade)
13 Beach Cities Where It’s Getting Easier To Buy a Home—and Possibly Cheaper, Too
(This content is restricted to Pro Members only. Upgrade)
Markets Where $25,000 Is a Down Payment
(This content is restricted to Pro Members only. Upgrade)
Rental Markets Where Apartments are in High Demand
(This content is restricted to Pro Members only. Upgrade)
List of Proptech Startups That Just Got Funded
(This content is restricted to Pro Members only. Upgrade)
Off Topic
Ranking the Biggest Single-Day Stock Swings of All Time
Unreal Real Estate
Want to live in the Ozarks?
Image
That's all folks. Let me know what you think of the email. Quite a lot went into it. If these emails aren't for you anymore, you can unsubscribe here.
Cheers,
Vidit
P.S - Read past newsletters here
Referral Milestones
Discount | Referrals Needed |
---|---|
3 MONTHS FREE on the Pro Plan | 1 |
30% off FOREVER on the Pro Plan | 5 |
50% off FOREVER on the Pro Plan | 10 |
75% off FOREVER on the Pro Plan | 15 |
100% off FOREVER on the Pro Plan | 25 |
If you are finding value, please consider helping the newsletter by becoming a paying subscriber
A subscription gets you:
✓ More issues per week
✓ Special reports on new housing studies
✓ Exclusive insights that are usually tucked behind paywalls (which I cover the costs for)
✓ Curated Top 10 lists
✓ The latest updates on prop-tech funding rounds
Want to sponsor the newsletter? Details here
Reply