Zillow index shows sharp rise in Twin Cities rents

  • Article by: JIM BUCHTA , Star Tribune
  • Updated: March 14, 2012 - 9:17 PM

The increase was the second-largest among 25 metro areas tracked by the site.

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Zillow.com, the website that brought the "Zestimate" to homeowners, now offers renters a "Rent Zestimate" aimed at tracking rent prices across the country.

The company said that in the Twin Cities metro area during January, home values were down 8.1 percent, while the Zillow rent index rose 11 percent. That was the second-highest annual rent price increase among the top 25 metro areas tracked by the group. Across the country, home values were off 4.6 percent, while rents were up 3 percent.

The Twin Cities trends weren't unique. The region was among 70 percent of all metropolitan areas that posted gains in rent; only 7.3 percent of metro areas saw an increase in home values.

"The flourishing rental market is the silver lining to the nation's housing downturn," says Stan Humphries, Zillow's chief economist.

The Zillow report is among dozens of studies that are released each month. Each uses its own data and methodology, and some are controversial. Brent Wittenberg is vice president of Marquette Advisors, a group that tracks rental market conditions in the Twin Cities metro. He said that while he's not familiar with the Zillow report, his analysis of 130,000 market rate rental apartments and townhouses in the Twin Cities metro area shows a 4.3 percent increase in rental rates during 2011.

"Rents continue to trend upward, corresponding with improvement in our economy and increasing apartment occupancy rates, but an 11 percent rent growth rate is not reflective of our regional apartment market," Wittenberg said.

And that's despite the fact that the Twin Cities apartment market is one of the strongest nationally right now in terms of demand and occupancy levels.

Wittenberg said, "We remain optimistic about the prospects for sustained rent growth in 2012, but not at an 11 percent level."

Zillow launched the rent index as a way to compare changes in home prices with changes in rent prices in an effort to track the ever-changing dynamics of the housing market. Company spokesperson Lauren Riefflin said that the group hopes to enable site visitors to use both measures to compare "the best option for their situation."

"The goal is to create an index that measures rent prices regardless of the mix of homes for rent at a given time," she said. "That means movement in the ZRI is true market movement, not just a change in the mix of what is listed for rent, or the price of what is listed for rent at a given time."

In a description of the methodology, Yeng Bun, Zillow's senior quantitative modeler, said that like the Zestimate for home values, the rent index is based on public records and "proprietary statistical and machine learning models."

Jim Buchta • 612-673-7376

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