Residential Rents Rising at Faster Rate in Most U.S. Cities

5.3 Percent Fewer U.S. Homes on the Market Than in 2017

According to the May 2018 Zillow Real Estate Market Report, median rent is appreciating more quickly this spring than last in 27 of the 35 largest U.S markets.

Pittsburgh, Detroit and Houston reported the greatest jumps in annual rent growth this spring compared to last. Median rent in all three of these metros was falling at this time last year, but is now appreciating over 1 percent annually.

In some of the nation's most expensive rental markets, median rent is appreciating more slowly now than last spring. In Seattle, for example, where annual rent growth has been among the highest in the country, rent appreciation has slowed from a 5.8 percent annual growth rate last spring, to a 3.3 percent annual growth rate now. A similar trend holds true in Los Angeles, Portland and Boston.

Across the U.S., rent growth has been holding steady at about a 2-3 percent annual appreciation rate for the past 11 months. Median rent rose 2.1 percent over the past year to $1,440 per month.

Saving enough money for a down payment is one of the greatest hurdles to homeownership, and rising rents is one of the main reasons why saving is so difficult. Even in markets where rent growth is slowing, high prices have already been established. With mortgage rates rising and mortgage affordability deteriorating, owning a home may start to feel out of reach for many Americans.

"Over the past two years, rent growth slowed across the country as new apartments hit the market and renters with the financial means to do so increasingly became homeowners," said Zillow Senior Economist Aaron Terrazas. "The slowdown in rent growth was most prominent in the markets that moved most quickly to add units - either because it was easy to build or because of local demands. But the ever-swinging pendulum is again on the move. This spring rent appreciation has perked back up nationwide, though it remains well within a long-term sustainable range. The ebb-and-flow of supply and demand is following slightly different timeliness in different markets, but over the past two years, we have seen similar trends in markets from the Southeast to the Northwest."

Home values continue to appreciate across the country. The median U.S. home value rose just over 8 percent over the past year to $216,000. San Jose, Calif., Las Vegas and Seattle reported the greatest annual home value appreciation among the 35 largest U.S. metros.

The median home value in San Jose is now $1,265,300, up almost 26 percent since last May. Home values rose 15.5 percent over the past year in Las Vegas and 12 percent over the past year in Seattle.

Spring home shoppers will have 5.3 percent fewer homes to choose from than last year, though the pace of inventory declines has been slowing for the past 10 months. Markets with the greatest drop in for-sale inventory are Denver, Atlanta and Pittsburgh. Home shoppers in Denver and Atlanta will have 15 percent fewer homes to choose from than a year ago, and 13 percent fewer in Pittsburgh.

May ended with mortgage rates on Zillow at 4.29 percent, after starting the month at 4.38 percent. May mortgage rates peaked in the middle of the month at 4.51 percent, the highest rate since the beginning of 2013, and hit a month low in the last few days of the month when rates were at 4.28 percent. Zillow's real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Mortgages site and reflect the most recent changes in the market.