Rent. CEO Jon Ziglar joins Yahoo Finance Live to discuss home buyers turning to the rental market as the housing market sees red-hot inflation, rising rent prices, and the outlook for evictions.
- The rental market is red-hot as prices continue to rise nationwide, launching bidding wars as renters try to combat the spike. Joining us now to discuss, we've got Rent CEO Jon Ziglar. Jon, this is really a headache for anybody who is actively renting or looking for a rental, because they're also going up against prospective home buyers who have now kind of removed themselves from that bidding war that's taking place as well. And so describe that kind of compression that we're seeing within the market right now.
JON ZIGLAR: Sure, and thanks for having me. You know, we've seen rent prices year over year, and especially over the past two years since the pandemic, increase significantly. Year over year, on average, about-- a one-bedroom apartment has gone up around 27%. And so that has continued to go.
Now, one thing to point out, though, is that since January, we've only really seen an increase of 2% to 3% across the board in terms of rent increases. So most of that run-up occurred during the pandemic-- during the pandemic era. As you point out, though, we do now have a situation where we have increasing interest rates and mortgage rates, which is gonna be pushing some people out of the homebuying market and pushing them back into the rental market. So you're gonna have a lot more competition for those apartments and those rentals, especially, probably, in the higher end, where those folks that were gonna be homebuyers are now gonna ultimately move into the rental side.
- Jon, are we looking at an upward price spiral in rent costs?
JON ZIGLAR: So that's a great question. We've already seen such an increase in appreciation, particularly in a lot of the Sun Belt markets and some of the major metro market markets. So you have markets like Austin, Texas, that are up over 100% year over year. I think what we're gonna see, probably, is more of a resetting versus a reversion to the mean. And I think, in particular, at the top end of the market, we are gonna have prices now reset and stay at those elevated levels and probably moderate in their increase over time as we move forward.
- So, Jon, here, I mean, we don't know right now when some of the additional capacity will kind of complete itself in coming online. But to what extent will additional units help actually bring down the prices?
JON ZIGLAR: Yeah, that's a-- you know, and I think that is the question. One of the challenges that we saw during the pandemic is that new home and new multifamily starts went to almost historic lows right after the Great Recession, so in 2008, and didn't return to those previous recession levels until 2015. So we've been digging out for a long time. Now, starts in the last two years have gone to levels we hadn't seen since the '80s. So we do see a lot of inventory that is gonna be coming online over the course of the next probably 12 to 24 months, depending upon any challenges that we have with the supply chain.
One challenge, though, I think we should need to be looking at, though, is that a lot of that inventory, from our understanding, is gonna be, once again, in that higher-level, the higher-rent units that are more profitable to build. And so I think you're gonna see some-- you know, some relief on that end. But on the lower-income, lower-level units, you know, it remains to be seen what the impact of new inventory is gonna be on those.
- Jon, these rent costs have gotten out of control. Are we looking at now a potential for evictions in this country going through the roof?
JON ZIGLAR: I mean, you know, we did have eviction moratoriums during the pandemic. Those have, by and large, gone away or expired. And we are seeing evictions that are at 150%, even up to 200% of historic norms in a number of markets. So I do think we are probably going to see evictions increase, mostly most likely because of the fact that you've got rents staying at these levels that are generally elevated versus the last two years.
And, in addition to that, you have massive inflation, prices at the pump, prices at the grocery store. And so the ability to maintain the payments on those rents, along with increased cost of living, is gonna be very difficult. I think the consumer beforehand was able to manage it because we did have a lot of liquidity in the market. And things were relatively inexpensive. So they could afford the rents. With everything else going up, I think that's gonna be harder for them to be able to manage.
- With some of the demand destruction that the Fed believes is necessary to combat inflation right now, what do you anticipate the national average for rents could be by the time the Fed continues-- or at least ends, I should say-- with its policy trajectory right now?
JON ZIGLAR: I mean, it is anyone's guess. We really do, though, see rental increases moderating significantly. So, as I mentioned, they've only increased about 2% to 3% nationwide since January. So that's half the year. And, in fact, from May to June, we actually saw a decline overall in the market, from 0.3% to 0.4%
So I really do-- I don't know if we're gonna see a significant run-up in rates from where they are today versus kind of, as I said, a reset-- a reset to the mean of where we-- you know, where we are gonna be going forward.
- All right. Based on what we've seen from your data, two-bedroom average rent right now, $2,047. And that was as of June. So we'll continue to watch this very closely here.
Jon, we appreciate the breakdown-- Jon Ziglar, who is the Rent CEO, joining us today. Thanks so much.