The US real estate market in 2022: Why have rental prices risen?
From 2020 to 2022, the US rental market has been preparing for something unpredictable. Financial analysts of the US real estate market are now faced with an inexplicable phenomenon. The matter is that rental prices are rising contrary to economic logic. According to economic laws, prices should fall. However, it did not happen. In contrast, US rental prices in 2022 are the highest since 1987.
The national average monthly rent for an apartment in August 2022 was $2,100. In July, this figure was $1,720. Over the decades, rents have grown in the same range as general inflation, ranging from 3.2% to 4.2%. However, in the first half of 2022, rent growth became abnormally high +18%. In some US cities, such as Detroit, Atlanta, or New York, the rent for housing of the same size and quality has increased by 45-50% in 2022.
The prices for studios have risen rapidly in 2022. This can be explained by the fact that during the coronavirus pandemic, people are accustomed to living in social isolation. For this market segment, the demand for the past year jumped by 80%. It is expected that the core of demand in this segment is formed by representatives of generation Z. These are those Americans who were born after 2000 and have just left their parents to live separately. From 2020 to 2022, the number of Generation Z people has almost doubled. Hence, the demand has been increasing, pulling the demand for studios along with it. This is what caused the automatic increase in rental prices for this type of property in many US cities.
The market is also disturbed by the fact that, since fewer Americans can afford to buy a house, they are forced to rent. Another factor that market analysts want to emphasize is an increasing number of freelancers who are looking for a remote workplace. Studios are ideal for this. Thus, you get office and housing in one place. Finally, the demand for rental housing is fueled by the thousands of Latin American migrants that the Joe Biden administration let into the USA this summer.
At the same time, there is no physical shortage of housing in the United States. On the contrary, after the end of the pandemic, the number of apartments or houses ready for sale has increased significantly.
Financial analysts have concluded that the real reason for the rise in housing prices is the following. Americans, corrupted by the social money that the government was throwing around during the pandemic, did not bargain much with landlords. When this money quickly ran out, prices once fixed at a certain level reluctantly fall back even when the factors that led to the initial increase disappeared.
Young people who have entered the market have a different psychology than their parents when it comes to the problem of housing. They do not want to deal with mortgages. Generation Z wants to travel, change jobs, and rent housing with like-minded people. Now, millions of Americans don’t want their own homes. So, they switched to the rental market that was not ready for such a quick generational shift.
