Renters looking to relocate are seeking out cities with low rents but strong economic activity, according to a recent analysis of renter profiles by real estate listing website Zillow.
Cities with the largest in-migration include Nashville, TN, followed by Raleigh, NC, San Jose, CA, San Francisco, and Denver in the top five.
As more renters pursue smaller markets with limited existing inventory, rental prices in those areas are expected to surge.
Cities that aren't accustomed to such rental demand are now becoming popular destinations for these tenants, driving up housing prices there because the markets already have a stable core population that isn’t likely to move elsewhere, Zillow Chief Economist Svenja Guddell said in a release. San Francisco and San Jose were listed on Zillow’s rankings for both in-migration and out-migration, as the high cost of living in those cities is pushing some residents out.
In a separate report this month, Zillow found that the most significant rent increases next year should occur on the West Coast, with Seattle and Portland, OR, prepping for the biggest hike.
Supply is a major concern in markets of all sizes. Multifamily construction is starting to slow down, dropping 38.9% from August to September and down 42.5% from September 2015, according to the Commerce Department, after leading recovery following the recession. That’s driving rents, particularly among the bottom one-third of the market, Zillow reported in August. Developers are largely focusing new construction on high-end and luxury multifamily housing while limited supply drives competition — and, therefore, prices — at the other end of the market.
A trend back toward greater homeownership is emerging, but it’ll be a slow build. The U.S. homeownership rate hit a 51-year low at 62.9% in the second quarter but bounced back to post a modest increase to 63.5% during the third quarter, the Census Bureau announced Thursday. Of the 1.1 million household formations during the quarter, more than half were owners.