The new normal for renters?

(NewsNation) — Last weekend, after touring an apartment in Chicago, I received a surprising request — “please submit your best offer via email,” the leasing agent told me.

“Best offer? I’m just looking to rent,” I reminded her, assuming there must have been some sort of confusion.

But the real estate agent understood exactly why I was there and assured me that the “winning application” would come in above the listed rent — those were the rules of the game now.

After some quick math, and a deep sigh, I offered to pay $50 a month above the asking price, hoping a smiley face and “best regards” would make the difference — they didn’t.

As I’ve now learned, bidding wars, which are common among would-be home buyers, have become the new normal for renters in some cities across the country.

While rising interest rates have pushed buyers to the sideline, renters are facing an increasingly competitive market amid a shrinking supply of available units.

A phenomenon that was once limited to the hottest markets, such as those in New York and San Francisco, experts say rental bidding wars are becoming more common nationwide.

“We’re seeing more and more signs of this creep up all across the country,” said Taylor Marr, the deputy chief economist at Redfin.

In May, the median monthly asking rent passed $2,000 nationally for the first time, according to Redfin data. Nationwide, asking rents are up 15% from the year prior.

“I would say most leases, especially on the higher end, are going for 10 to 20% over list price,” said Blake Stargel, a Los Angeles real estate agent with Compass.

The bad news for renters: Prices could get worse from here.

Unlike the home-buying market, where rising interest rates have already slowed demand, the rental market depends on turnover. When prospective buyers decide to wait, rental inventory shrinks. With more people looking for fewer units, prices go up.

“(Rising interest rates) are pushing people to stay in the rental market rather than purchasing. So I only see the rental market becoming more competitive as time goes on,” Stargel said.

In New York, the most expensive rental market in the country, the median asking rent is over $4,000 — up nearly 25% from the year before.

But many of the markets that have seen the sharpest rent increases are not on the coasts. In cities such as Cincinnati, Austin, Texas, and Nashville, Tennessee, asking rents have surged more than 30% since May 2021, according to Redfin.

Marr described it as “boomerang demand” — workers who left their hometowns to get jobs on the coast are now returning because they can work remotely.

He pointed out that even a small increase in migration can have an outsized impact in cities where housing inventory is already tight to begin with.

So what can you do if you find yourself in a bidding war?

Stargel recommended sending a personal letter and explaining what you love about the property. He said in some cases, landlords will choose the applicant they connect with even if the offer is lower.

For those that can wait, Marr said that better deals are often available in the winter because that’s when fewer people are moving.