While many markets are experiencing the continued national decline in rents, another trend has emerged, with some metros seeing more out-of-market renters than in-market renters.
Realtor.com, in its October report, says over the past six years 20 of the 50 largest metros have transitioned from being dominated by local renters to being more driven by out-of-market demand.
As an example, the report compares New York City, which has the largest share of demand from local renters at 74.8%, to Raleigh, N.C., which is attracting the highest proportion of out-of-market renters at 69%.
Joel Berner, senior economist for Realtor.com, pointed out that some areas are really seeing a lot of out-of-town renters coming in. In an interview with Rental Housing Journal, Berner said, “There are some hot places like Raleigh, North Carolina. People are interested in moving to Raleigh. That I think is genuinely getting a lot of out-of- market activity.
“But in some places – a lot of places – people who would be moving in town are staying put. Those people are not shopping on Realtor.com. So, it looks like a larger share of out-of-towners.
“There are a lot of people who would have upgraded their rental within the same metro area where they live, maybe moving a couple of blocks away to a nicer unit. They are not doing that this year. They are staying in place.
“So, the share of activity looks like it is growing in favor of out-of-towners, but that has actually held pretty steady for a lot of places. So, there is actually less local activity going on.”
Of the 20 largest metro areas that shifted from more in-market views to more out-of-market views, the most pronounced are the more affordable metros such as Detroit, Philadelphia and Sacramento, areas where relatively lower rents have attracted out-of-town rent-shoppers.
There is a hidden piece of this, too – the retention piece.
“The share of folks moving city to city is about steady year over year or year over five years. The stories I am hearing are the people concerned for their jobs. People are not interested in moving. In bad times, it’s a risk. I think the prevailing economic sentiment is more conducive to people staying in place,” Berner said. “I am skeptical that anybody in the country can up and move to save $100 a month in rent.”
The report points out that both Raleigh and Nashville are markets dominated by views from out-of-market renters.
“Thee metros generally offer more affordable home prices, which contribute to higher homeownership rates and a smaller pool of local renters. At the same time, they attract newcomers with strong job opportunities and renter-friendly environments,” the report says.
