Higher mortgage costs are reshaping the rental market
The typical U.S. rent reached $1,932 in September, the highest level in three years, as high mortgage rates pushed more would-be buyers toward rentals, according to an October report from Zillow. Rental demand increased by nearly 20% from a year earlier.
The shift is tied to the gap between the cost of renting and buying. Zillow said the average monthly payment for a homebuyer had reached $3,037, making a rental a less expensive alternative for households that cannot or do not want to take on the higher cost of purchasing a home.
“Elevated mortgage rates have pushed home shoppers straight into the arms of rentals,” Zillow Senior Economist Kara Ng said.
That additional demand is arriving as the supply of available homes and apartments remains constrained. Higher borrowing costs have slowed home purchases, but they are also making it more expensive for construction companies to finance new apartment projects. The result is a market in which more people are seeking rental housing while fewer new units are being added.
Demand has climbed sharply in several large markets
Zillow’s figures show particularly large year-over-year increases in rental demand in several U.S. cities:
| City | Change in rental demand |
|---|---|
| San Jose, California | 82.5% |
| San Francisco | 66.9% |
| Austin, Texas | 49.3% |
| Miami, Florida | 48.9% |
| Phoenix, Arizona | 43% |
San Francisco also recorded the largest year-over-year rent increase among the markets cited, at 11.8%. Zillow said an apartment that rented for $4,000 a month in September 2025 would have rented for an average of $4,472 in September 2026.
Limited supply could keep pressure on renters
Jonathan Millar, an economist, told The New York Times that renters were unlikely to receive broad relief soon because landlords continued to benefit from strong demand and limited supply. He said high mortgage rates were also restricting construction financing for new apartment complexes.
“We’re not in deceleration world anymore, probably not going to get a lot of disinflationary pressures from rents,” Millar told The Times. “If anything, the risks are that we may be going the other direction.”
The national picture is not uniform. Zillow reported that rental demand declined year over year in some markets, including Louisville, Kentucky, where it fell 6.2%; Baltimore, where it fell 6.1%; and Washington, D.C., where it fell 5.6%. Those declines contrast with the sharp increases in demand recorded in parts of California, Texas, Florida and Arizona.
- National rent: $1,932 in September, a three-year high.
- Homebuyer payment: $3,037 per month on average, according to Zillow.
- Main pressure: Mortgage costs are keeping more households in rentals while limiting new housing construction.
