Across 100 Largest U.S. Markets, COVID-19 Decimates Rental Activity

In this article

Landlords and rental property owners know that the ongoing pandemic has disrupted the spring selling and renting seasons. Aside from personal experience, there’s also analytical data that helps prove the point: Back in mid-March, search traffic on the rental site RENTCafe.com fell by approximately 25% compared to the previous week.

Other statistics for the site:

• Overall traffic dropped 22%
• Paid advertising fell 28%
• Use of its rent affordability calculator decreased 29%
• 48% fewer users searched for apartment utility information

From a broader perspective, Google searches for terms like “apartments for rent” and “apartments near me” have decreased exponentially compared to “home office setup,” “home workout,” and “home disinfection.” No surprise there.

But we wanted to take a closer, more specific look at how rent prices and leasing activity have changed over the course of the first quarter of the year. To do that, we created a list of 100 of the largest U.S. cities and compared deactivated listings—our proxy for number of units rented and thus “deactivated”/taken off the market—for the week ending 1/24/20 (pre-coronavirus) and compared that to deactivated listings for the week ending 4/17/20 (in the midst of the pandemic).

We also compared the average pricing for deactivated listings—which we’re using to infer market rent price, since presumably these properties are being rented at these price levels—for the same dates and for the same markets.

Standout Statistics

Nearly Universal Declines in Deactivated Listings

The number of rental listings coming off the market in some cities dropped like crazy: New York City plunged 85%, and Los Angeles fell 76%. But it’s not just big metropolitan areas: McLean, VA was down 96%; Fountain, CO declined 92%; and Cortland, NY went over a precipice with a whopping 98% drop.

Overall, 95 of the top 100 cities lost deactivated inventory between January and April, with decreases that ranged from 3% to 98%. Only five locations saw changes in deactivated listings that were less than +10%: Las Vegas, NV; Tampa, FL; Colorado Springs, CO; Detroit, MI; and Birmingham, AL.

Increases in deactivated listings were a distinct minority:

• Brighton, MA (20%)
• Tampa, FL (3%)
• Colorado Springs, CO (1%)
• Detroit, MI (8%)
• Lubbock, TX (27%)

These markets were able to see increases in the number of units successfully rented to tenants despite drastic changes due to COVID-19.

Surprisingly Stable Pricing

Even though more than 75 of the top 100 markets experienced drops in deactivated listings of 30% or more, most maintained reasonably stable market rent prices (+10% change or less). There was a notable group of 16, however, that saw rent increases of 15% and higher.

The most extreme on both measure (changes in deactivated listings and pricing), as mentioned, is Cortland in upstate New York. In addition to its eye-popping 98% plummet in deactivated listings, prices jumped an average of 55%. It’s possible that increases landlords are making in rent prices are working against their ability to get units filled during tough economic times—or that the only units still able to be rented in certain markets are higher priced properties attracting a wealthier population less affected by recessionary trends.

Cortland’s cratering deactivated inventory may also be linked to the loss of nearly 7,000 students who normally attend the branch of the State University of New York (SUNY) that is based there. With the school closed, the number of students, which would normally have an out-sized impact in a town of 19,000, has dramatically diminished, leaving few other sources of new renters. (In neighboring Ithaca—also a college town, but double the size—average rent increased 10% against a 79% reduction in deactivated listings.) As a result, owners/landlords may be having major issues getting their units rented and off the market. Cortland serves as another example of a market where measures taken to keep the public safe are impacting rental markets and general economic conditions.

By contrast, other markets of various sizes that experienced large drops in deactivated listings saw relatively modest price decreases of 10% or less.

Three cities posted significant price decreases: Milwaukee and Oakland (-15%) and W. Palm Beach (-31%). Interestingly, Milwaukee and Oakland had vast differences in their drop in deactivated listings (-17% and -61%, respectively). And even though Oakland and W. Palm Beach were relatively close in the deactivated listings category (-61% and -73%), Oakland’s price decrease more than doubled W. Palm’s.

Three cities had no price changes at all: Los Angeles, Seattle, and Kansas City.

Hotspot vs. Non-Hotspot

All of these results are interesting as stand-alone data for individual locations. But how do markets compare against one another? To answer that, we did a more specific comparison of cities of similar sizes, with a view towards whether or not they have been considered hotspots for COVID-19 spread.

A couple of “cheats” were included for comparison purposes:

• New York is compared to Los Angeles, even though New York’s population is more than twice as large.
• New Orleans (which was not in the top 100—it’s #166) is included because of recent concern over its rate of infection spread and because its population is similar to Wichita.

The most striking result here is that with the exception of Seattle, all hotspot locations experienced market rent price declines of varying degrees. And with the exception of Las Vegas (and Los Angeles, which experienced no change), all of the non-hotspot cities saw modest market rent price increases during the first quarter

Since COVID-19 infections will presumably continue to fluctuate for a period of time, it will be interesting to track pricing results against the rate of infection and the adequacy of public health and governmental responses in various communities.

What to Expect in the Short-Term

It’s too early to have any certainty about how this health crisis will ultimately impact rental markets nationwide. In hindsight, we do know that during the SARS outbreak in 2003, home prices in Hong Kong fell only slightly (-1.6% overall and -2.8% in infected areas), but new sale transactions dropped anywhere from 33% to 72%. Business went back to normal levels after the epidemic ended.

If we assume, then, that property values remain steady, the bigger piece of the puzzle will be how long it takes renters begin to feel confident enough in their personal finances and that the immediate public health threat has passed. Only then will there be customers looking of places to live that test the health of the market and local economies.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.