Real estate experts agree that rental housing costs are primarily driven by supply and demand. For residents, however, the reality is clear: housing has become increasingly unaffordable.
“Residential rents have skyrocketed across the country in the last 18 months,” stated Joe Herrera of El Paso Home Buyers, a leading company in the El Paso metro area. “While price increases aren’t new, the current magnitude is unprecedented. Virtually every major city in the nation is facing a similar housing affordability crisis. In the El Paso metro area alone, residential rental rates increased by 12.7% in 2021. Similarly, we’ve witnessed a significant spike in residential home prices, with the median price of a home sold in El Paso climbing to $200,000—a 12.4% increase from 2020. As a result, some potential home buyers in El Paso can no longer afford to purchase a home, pushing them back into the rental market.”
What Did Rental Prices Do in 2021?
The median rent for a two-bedroom property across the 50 largest metro areas in the U.S. rose to $1,781 in 2021, representing a 19.3% increase. This marked six consecutive months of double-digit annualized growth in rental prices. Astonishingly, this growth rate is nearly six times faster than the pre-2020 average, which was prior to the COVID-19 pandemic. Rental prices for other unit types, such as one-bedroom and three-bedroom homes, followed a similar trend.
According to a survey by Realtor.com, the metro areas with the highest rental price increases were Miami (49.8%), Tampa (35.0%), and Orlando (34.1%). The Jacksonville metro area ranked seventh with a 29.0% increase. Comparatively, the El Paso metro area experienced a more moderate rental price growth of 12.7% in 2021.
Did All Metro Areas in the U.S. See Rental Price Increases?
Interestingly, not all metro areas experienced significant rental price growth in 2021. San Francisco and San Jose were notable exceptions, with declines in rental prices. Meanwhile, metro areas like Chicago, Boston, New York, Minneapolis, and Washington, D.C., saw modest growth of 3% or less.
Why Are Rents So High in the U.S.?
The primary reason is supply and demand. There are more people seeking rental housing than there are homes and apartments available. This imbalance creates a bidding war environment, enabling property owners to raise rents repeatedly. Any new housing or apartment construction is often sold or leased at higher prices.
What is the Rental Market Forecast for 2022?
Experts predict that the rental market will continue its strong growth, with nationwide increases exceeding 10%. However, this trend may eventually reach what economists refer to as “housing affordability.” This term highlights the point at which households can no longer afford rental or homeownership costs, based on income ratios.
In economic terms, “Can’t pay, Won’t pay” reflects a threshold where high housing costs force households to allocate disproportionate amounts of income to rent or mortgage payments, leaving little for other essentials.
Home Buyers in El Paso anticipate a tighter housing inventory and higher prices throughout 2022. The Fear of Missing Out (FOMO) phenomenon is exacerbating bidding wars, further driving up costs. It may take years for new residential construction to adequately meet El Paso’s housing demand.
