Zillow: Rents to Flatten in 2016

After years of record rent appreciation, Zillow's rental forecast shows relief in sight for cash-strapped renters.

- National median rent at the end of 2015 was $1,381, and is expected to increase slightly to $1,396 over the next 12 months.

- The slowdown in rents means that, by the end of the year, they will be rising at a slower pace than incomes in many markets.

- In December, home values rose 4 percent to a Zillow Home Value Index of $183,500.

News provided by

Zillow

Jan 22, 2016, 08:00 ET

SEATTLE, Jan. 22, 2016 /PRNewswire/ -- Rent appreciation will level off over the next 12 months, slowing to an annual rate of 1.1 percent by December 2016, according to the new Zillow^® Rent Forecastⁱ. The national Zillow Rent Indexⁱⁱ at the end of 2016 is projected to be $1,396 -- compared to $1,381 in December 2015.

Zillow is forecasting a decrease in the rate of rental appreciation amid a rental affordability crisis that has renters in some markets spending almost half of their income on rent. Some of the fastest growing metros had double-digit annual rental appreciation at the end of 2015.

Zillow expects rental appreciation to slow down most significantly in Nashville, Tenn., San Francisco, Portland, Ore. and Denver. Rents in San Francisco saw 12.5 percent appreciation in 2015. Zillow forecasts rent in San Francisco will grow half as fast in 2016 -- 5.9 percent.

Even with the slowdown, rents will remain unaffordable in many of the major markets across the U.S., especially on the West Coast. Renters in San Francisco and Los Angeles can expect to spend 40 percent of their income on a rental paymentⁱⁱⁱ.

"Hot markets are still going to be hot in 2016, but rents won't rise as quickly as they have been," said Zillow Chief Economist Dr. Svenja Gudell. "The slowdown in rental appreciation will provide some relief for renters who've been seeing their rents rise dramatically every single year for the past few years. However, the situation remains tough on the ground: rents are still rising and renters are struggling to keep up."

The slowdown in rental appreciation indicates that supply of new multi-family homes is catching up to demand. Substantial new housing supply is becoming available in Atlanta, Denver, Portland, Seattle, and other markets.

The Zillow Home Value Index rose 4 percent year-over-year in December 2015, to $183,500, according to the Zillow^® December Real Estate Market Reports^iv.

Metropolitan Area	Dec. 2015 ZHVI	Dec. 2015 ZRI	ZRI Forecast for Dec. 2016	Forecasted Difference Between Dec. 2015 ZRI and Dec. 2016 ZRI
United States	$ 183,500	$ 1,381	$ 1,396	1.1%
New York/Northern New Jersey	$ 381,200	$ 2,384	$ 2,400	0.7%
Los Angeles, CA	$ 554,700	$ 2,491	$ 2,561	2.8%
Chicago, IL	$ 193,000	$ 1,633	$ 1,611	-1.4%
Dallas-Fort Worth, TX	$ 177,200	$ 1,500	$ 1,532	2.1%
Philadelphia, PA	$ 203,100	$ 1,558	$ 1,550	-0.5%
Houston, TX	$ 170,100	$ 1,579	$ 1,619	2.5%
Washington, DC	$ 357,800	$ 2,107	$ 2,118	0.5%
Miami-Fort Lauderdale, FL	$ 225,700	$ 1,822	$ 1,886	3.5%
Atlanta, GA	$ 160,000	$ 1,274	$ 1,280	0.5%
Boston, MA	$ 382,900	$ 2,247	$ 2,309	2.7%
San Francisco, CA	$ 785,800	$ 3,338	$ 3,536	5.9%
Detroit, MI	$ 121,800	$ 1,132	$ 1,128	-0.4%
Riverside, CA	$ 298,200	$ 1,691	$ 1,723	1.9%
Phoenix, AZ	$ 216,000	$ 1,249	$ 1,266	1.4%
Seattle, WA	$ 368,700	$ 1,931	$ 2,018	4.5%
Minneapolis-St. Paul, MN	$ 214,300	$ 1,500	$ 1,511	0.8%
San Diego, CA	$ 499,900	$ 2,316	$ 2,348	1.4%
St. Louis, MO	$ 141,000	$ 1,123	$ 1,115	-0.7%
Tampa, FL	$ 160,100	$ 1,296	$ 1,302	0.5%
Baltimore, MD	$ 242,300	$ 1,714	$ 1,702	-0.7%
Denver, CO	$ 320,800	$ 1,952	$ 2,031	4.0%
Pittsburgh, PA	$ 126,700	$ 1,090	$ 1,079	-1.0%
Portland, OR	$ 310,200	$ 1,689	$ 1,753	3.8%
Charlotte, NC	$ 157,800	$ 1,221	$ 1,250	2.4%
Sacramento, CA	$ 331,500	$ 1,599	$ 1,654	3.4%
San Antonio, TX	$ 148,000	$ 1,301	$ 1,306	0.4%
Orlando, FL	$ 180,600	$ 1,343	$ 1,373	2.2%
Cincinnati, OH	$ 141,800	$ 1,225	$ 1,243	1.5%
Cleveland, OH	$ 124,300	$ 1,124	$ 1,117	-0.6%
Kansas City, MO	$ 146,600	$ 1,199	$ 1,228	2.4%
Las Vegas, NV	$ 199,800	$ 1,212	$ 1,191	-1.8%
Columbus, OH	$ 150,900	$ 1,271	$ 1,289	1.4%
Indianapolis, IN	$ 130,100	$ 1,181	$ 1,138	-3.6%
San Jose, CA	$ 933,000	$ 3,431	$ 3,699	7.8%
Austin, TX	$ 242,900	$ 1,683	$ 1,741	3.4%

About Zillow

Zillow^® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the biannual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ: Z and ZG), and headquartered in Seattle.

Zillow is a registered trademark of Zillow, Inc.

ⁱ The Zillow Rent Index forecast is based on recent and historical trends in rents, and is calculated using ARIMA times series models. It is adjusted to account for seasonality and geographic consistency.

ⁱⁱ The Zillow Rent Index (ZRI) is the median Rent Zestimate^® (estimated monthly rental price) for a given geographic area on a given day, and includes the value of all single-family residences, condominiums, cooperatives and apartments in Zillow's database, regardless of whether they are currently listed for rent. It is expressed in dollars.

ⁱⁱⁱ This figure comes from Zillow's affordability analysis for the third quarter of 2015. That analysis found that renters in LA can expect to spend 39.9 percent of their incomes on rent, and renters in San Francisco can expect to spend 40.6 percent. Zillow determines affordability by analyzing the current percentage of a metro area's median income needed to afford the rent or the monthly mortgage payment on a median-priced home or apartment, and compared it to the share of income needed in the pre-bubble years between 1985 and 1999. For mortgage affordability, Zillow assumed a 20 percent down payment and a 30-year, fixed-rate mortgage at prevailing mortgage rates pulled from the Freddie Mac Primary Mortgage Market Survey. If the share of monthly income currently needed to afford the median-priced home or apartment is greater than it was during the pre-bubble years, that area is considered unaffordable for typical buyers or renters.

^iv The Zillow Real Estate Market Reports are a monthly overview of the national and local real estate markets. The reports are compiled by Zillow Real Estate Research. For more information, visit www.zillow.com/research/. The data in Zillow's Real Estate Market Reports are aggregated from public sources by a number of data providers for 928 metropolitan and micropolitan areas dating back to 1996. Mortgage and home loan data are typically recorded in each county and publicly available through a county recorder's office. All current monthly data at the national, state, metro, city, ZIP code and neighborhood level can be accessed at www.zillow.com/local-info/ and www.zillow.com/research/data.

SOURCE Zillow