.png){kind=logo}
The fates of the for-sale housing market and the for-lease apartment sector have always been inextricably linked. While shifts in preferences, underwriting standards, household finances, and demographics create changes on the margin, the investment health of housing in the United States moves as a monolith over the long term. Since 1985, rents and home prices have had a correlation above 96%.
Over the short term, however, cyclical factors can distort strong-rooted structural relationships. Considering the unrelenting pace of volatility the housing market has absorbed since the pandemic, opportunities for distortions are plentiful.
In this briefing, we will explore changes in for-sale asset prices and rents across the 100 largest US metro areas, as tracked by Zillow. In doing so, this study will identify markets that have seen home prices rise more quickly than rents since the onset of the pandemic. With the long-term relationship between rents and home prices in mind, we consider markets with large differentials prime candidates for faster-than-average rent growth for the years ahead.
McAllen, Texas
McAllen, TX — perhaps surprisingly — leads the country with the most substantial home price/rent growth differential since the onset of the pandemic (31.2 percentage points). The metro area, which sits at the Texas southern border and is home to nearly 900 thousand people, has seen home prices skyrocket by 57.0% between February 2020 and February 2024. Meanwhile, rents have risen only half as quickly, increasing 25.8% over the same period. Population growth in the McAllen metro area continues to be robust, more than doubling the national average in each of the past three years.
Charlotte, NC
Charlotte, NC, is the first of three North Carolina metros on the list — highlighting the interconnectedness of the state’s local economies. Since pre-pandemic, home prices in Charlotte have grown by 55.8% while rents have risen by 33.6% — resulting in a 22.2 percentage point differential. Despite already holding the title of North Carolina’s most populous MSA (2.8 million residents), Charlotte continues to keep its foot on the gas. In each of the past three years, its annual population growth rate has accelerated, reaching a recent high of 1.8% in 2023.
Durham, NC
Durham, NC, is the smallest metro area to make the top five, with a resident population of just under 609 thousand people. Between February 2020 and February 2024, home prices in Durham are up by 52.1%, while rents have jumped by 31.3% (20.8 percentage point differential). North Carolina’s ability to attract and retain labor market talent continues to be a hallmark of its success. Hiring growth in the Durham MSA is outpacing the US average, with the number of employees in the metro rising 2.4% year-over-year through February 2024 (US: +1.8%).
Raleigh, NC
Located just 30 minutes southeast of Durham, Raleigh’s post-pandemic housing market trends are a mirror image. In Raleigh, home prices have risen by 50.2% over the past four years, while rents have grown by 29.7% — yielding a 20.5 percentage differential. Of all the top five markets on this list, Raleigh had the fastest-growing population in 2023, with its base of residents swelling by 2.0%. Moreover, since 2020, the resident population in Raleigh is up by an impressive 6.5%. Over the same period, the US population has grown by just 1.0%.
Seattle, WA
Rounding out the top five is Seattle, WA. Seattle is the only metro at the top of the list where metro-level home price growth has not exceeded the national average over the past four years. Home prices in Seattle are up 38.7% compared to pre-pandemic — sitting below the 41.9% measured nationally. Similarly, rent growth has also lagged the national average, rising by 19.1% between February 2020 and February 2024 (US: +29.9%). Still, the differential between home price and rent growth is a substantial 19.6 percentage points. While Seattle is the largest metro area to make the list (4.0 million residents), it is also the only metro to see any recent population declines during the post-COVID era (2021: -0.3%). However, the metro has swung back into growth, adding residents in 2022 (+0.4%) and 2023 (+0.3%). Notably, while Seattle’s growth is tepid compared to the Sun Belt standouts, other West Coast comps, such as San Francisco and Portland, have continued to see population declines in each of the past two years.
Methodology: Data are from the Zillow Observed Rent Index (ZORI), measured through February 2024. Qualifying metros are ranked by the differential between total home and rent price growth between February 2020 and 2024. Qualifying markets for this study are those meeting the following five criteria:
- Top 100 MSA by population
- Positive annual home price growth through February 2024
- Positive monthly home price growth through February 2024
- Positive annual rent price growth through February 2024
- Positive monthly rent price growth through February 2024