Rent appreciation began to recover in November after a long slide that began in February, and home value growth soared to new heights, according to Zillow’s® latest Real Estate Market Report. Looking forward, Zillow economists predict 2021 sales to be the strongest since 2005, for rent growth to make up for what it lost in 2020, and for home values to reach 10% year over year growth by November.
The typical U.S. rent was up 1.1% year over year in November to $1,734, after sliding from 3.9% growth in February to just 0.7% growth in October. Among the 100 largest U.S. markets, monthly rent growth was highest in Stamford, Connecticut (3.1%), Providence, Rhode Island (2.3%), and Ogden, Utah (2.1%).
Typical rents in November are roughly the same place they began the year, rising only $4 since January as renters were particularly hard-hit by the coronavirus pandemic and resulting recession. Just recently, Gen Z renters especially began venturing back out on their own and often finding good deals, but a predicted rebound in the rental market may make those a limited-time offer.
“With a vaccine on the horizon and Gen Z continuing to graduate from college, we expect the cloud of uncertainty surrounding the pandemic to lift and demand rental units to surge in 2021,” said Zillow senior economist Chris Glynn. “Though the coming rebound in the rental market is good news for some, it will certainly put millions of renters who were hit hard by pandemic-related income loss in an even more tenuous position, and further government intervention will likely be needed to avoid a painful wave of evictions.”
While the rental market appears poised to turn the corner, the for-sale market continues to have the pedal pressed firmly to the floor. Zillow’s typical home value rose 1.1% from October to November and 3% over the past three months — both of which are the largest gains on record going back to 1996.
Home values across the U.S. rose 7.5% since last year to $263,351. The largest annual increases by metro are in San Jose at 14.2%, Phoenix at 14.1%, and Seattle at 13.2%.
The rapid acceleration in home values across the U.S. is driven by robust demand and diminishing inventory — the same forces that established this sellers’ market after a short spring lull.
Looking forward to next year, Zillow economists expect home values to increase by 3.6% in the three months ending February 2021 and by 10.3% from November 2020 to November 2021.
“We expect the housing market to continue its bull run from this summer and fall well into 2021,” said Zillow senior economist Jeff Tucker. “This rapid price growth will be driven by the same factors that took the steering wheel in 2020: strong demographic trends, shifts in buyer preferences sparked by the pandemic, low mortgage rates, and short supply. The millennial generation is moving into their mid-30s and bringing a wave of demand from renters looking to buy their first homes.”
Despite the pandemic, 2020 has been a solid year for sales. Zillow economists expect 5.7 million homes to be sold by the end of the year — 5.9% more than were sold in 2019. Next year is forecasted to be much stronger, with 6.9 million homes expected to be sold — the strongest year since 2005 and 21.9% more than 2020.
Mortgage rates listed by third-party lenders on Zillow started the month at 2.86%, hit monthly highs of 2.92% on Nov. 3 and Nov. 9, and then reached down to monthly lows of 2.72% on Nov. 18 and Nov. 20 before finishing out the month at 2.80%. Zillow’s real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Group Mortgages site by third-party lenders and reflect recent changes in the market.
