How and where people live saw a drastic transformation due to the COVID-19 pandemic. Following the initial lockdowns around the country aimed at slowing the virus’s spread, society reopened with a large emphasis on remote work and social distancing which led many to relocate away from city centers. Although some individuals migrated out of densely populated urban areas early on, with many relocating to more spacious and affordable Sun Belt states, a considerable number of people ended up moving to local suburban regions within the same metropolitan areas.
Typical migration patterns changed rapidly, wreaking havoc in the rental housing market. Many people leaving big cities desired to buy their own homes. However, the combination of historically low interest rates, millennials aging into the stage of life where homeownership is more appealing, and low housing supply created fierce competition in the real estate market, pricing out potential homebuyers. With a greater number of individuals remaining in the rental market, demand for rental units surged while rental vacancies dwindled.
The U.S. rental vacancy rate—or the measure of rental homes that are vacant in a given area—is facing a long-term decline. After a steady increase in the rental vacancy rate from the 80s through early 2000s, in part the result of increasing production of new housing units, the housing market crash and resulting Great Recession brought a dramatic reduction in housing investment and a rapid decline in rental vacancies. And although the pandemic produced an initial increase in rental vacancies as many rushed to purchase homes, the effect was short-lived and the downward trend continued through 2022.
The rental vacancy rate is an important economic indicator because it signals the balance between supply and demand for rental homes. When the rate is relatively high, it indicates an abundance of available rental properties, which typically places a downward pressure on…
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