Zillow’s Rent Forecast for August 2016 to August 2017 predicts rent-appreciation rates far above the national average for many West Coast metro markets, most notably the country’s tech centers.
Overall, Zillow predicts rents will rise in 34 out of 35 of the largest U.S. metro areas; 11 of those 35, however, are expected to report slower growth. The national average rent is expected to rise 1.7% next year, an unchanged rate of appreciation from the past 12 months.
Out of Zillow’s 10 highest-forecast rent-appreciation rates, nine are for Western or West Coast cities. Last year’s forecast included Boston and Miami, but San Jose, Calif., and Cincinnati have taken their places. Cincinnati, at No. 4, is the only non–West Coast metro in the top 10.
Rents in Seattle, the No. 1 metro on the list, are expected to appreciate by 7.2% over the next year, a figure almost four times as high as the national appreciation forecast. In No. 2 Portland, Ore., rents are expected to rise 6.0%. All of the top 10 metro rates are more than double the national rate.
Zillow chief economist Svenja Gudell attributes the explosive growth of rent in these markets to the low supply and high demand for rental units in tech-heavy metros, many of which are located on the West Coast. Millennials are drawn to these cities by job opportunities and high salaries, only to encounter a very high cost of living.
"We have more renters today than in the past, and most newly formed households are renter households,” Gudell said in a statement. “This, taken together with a lack of new rental construction at less expensive price points, has been a recipe for rising rents. There's good news for renters on the horizon, though. Current renters in these markets can expect rents to slow down a bit over the next year. Instead of the 10% rental appreciation we've been seeing in some places, expect growth more along the lines of 4% to 7%. This is still high but will hopefully give renters some relief."