Dive Brief:
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Rents will continue to rise on the West Coast in the year ahead, according to real estate website Zillow.
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Seattle and Portland, OR, should expect the most significant increase, followed by Denver, San Francisco, and San Jose, CA, due to growing demand and limited supply and young professionals flock to the region's tech hubs.
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Rents slowed in 11 of the 35 biggest metros in the West and can be expected to continue to do so, softening from 10% appreciation to 4% to 7%.
Dive Insight:
More newly formed households are renters today than were previously, Zillow Chief Economist Svenja Gudell said in a release. A decade ago, two in 10 households rented their property, according to the National Multifamily Housing Council. Today, that figure has nearly doubled with the people under the age of 30 accounting for 51% of renters, the NMHC reported.
However, during and following the recession, developers focused on creating rental properties for the higher-end market and existing renters and owners failed to put existing property back on the market. As a result, potential renters seeking lower-priced and affordable properties were left with limited supply, contributing to the continual increase in prices. The limited number of affordable rentals in conjunction with population increases, especially in cities with high job growth like San Francisco, Houston and Denver, is also pushing prices up.
That could soon change. Apartment construction is at a 10-year high and property owners may start to lower rents, with particularly strong growth across Texas. San Francisco, whose struggle with creating enough affordable residential inventory to meet demand is well documented, could add as many as 14,000 units to its rental offerings by allowing small spaces like storage areas and utility rooms to be converted into livable, rentable spaces.