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Apartment Rental Prices USA

December 02, 2020

Apartment Rental Prices

A trend in rent prices has swept across the  US  (and UK, Germany, Canada, Australia).  Apartment rent prices fell in major cities while house rental prices grew in pandemic destination cities and towns.

While rents climb in the pandemic destination cities, apartment rent decreases in urban areas are beginning to moderate. This is good news for urban apartment owners and multifamily developers across theUS.  Zumper’s latest rental apartment price report reveals that only major urban areas are seeing continued rental price decreases  (e.g., San Francisco and New York City).

The Corona Virus, crime, the work from home trend, desire for lower rent and more space are sending apartment renters out of the cities and into houses in surrounding suburbs, commuter cities and towns.  That’s driving up house rental prices and leaving apartments for rent behind.

As the Zumper rental price chart below shows, surprisingly, apartment rent prices seem to be recovering.

Of course, once a Covid 19 vaccination is distributed, we may see some renters return to San Francisco and New York City, but that demand may not as brisk as landlords would like.

Zumper rent prices in December. Screenshot courtesy of Zumper.

Is the Downward Rent Trend Ending?

As the Apartment List chart below signifies, the national rent index has declined by 1.4%.  While some landlords in urban areas have suffered badly, 1.4% is not the disaster that could have occurred.

And it’s good news both for rental property investors and for property management companies.

There is a lot happening in rental markets today. Governments are strained to deliver aid payments, decide on rent and eviction moratoriums, fight off legal actions against them, and encourage more rental construction.

Demand for Realtors, moving companies, and property management companies should stay strong for the rest of the year.  As we can see in this graphic, a trend to lower rent prices happening. But this may be in the apartment rental sectors and not so much in the house rental sector.  House prices continue to climb which will raise rent prices.

Updated Rent Prices to Present

Apartmentlist in contrast to Zumper, reports rents heading further downhill by .5% last month. Notice the huge 4% rent growth from December to August period too.  They acknowledge that much of their trend graph influenced by falling rents in major metros.

Updated Rent Prices 2016 to 2020. Screenshot courtesy of Apartmentlist.com

Apartment Rent Falling in Big US Cities

From Zumper’s latest rent price report includes the month of November show a downward trend.

The rental housing market is changing. The big cities either saw rents stay the same or fell.

In San Francisco, 1-bedroom rent prices plummeted 3.6% down from $2830 to $2700 per month. 2-bedroom units plunged 3.3% from $3800 per month down to $3570.  Combined, median rent prices have dropped over 21% from last year.

In New York, 1 bedroom apartments fell 3.1% from the previous month from $2600 to $2470, and 2-bedroom units fell 3.4% from $2990 per month to $2800. They are down 16% and 18% from last year, respectively.

In Boston, rents were flat last month, but are now starting to drop. 1 bedroom rent prices decline 2.7% to $2150 per month, and 2 bedroom rents declined 3%.  They are down 14% and 11.9% respectively from last year.

In San Jose, 1 bedroom apartments dropped 1.1% to $2090.  And 2 bedroom rentals fell 1.1% from last month to $2650.  Those fell 14.7% and 8.60% respectively from last year.

Oakland another very high-priced rental market, saw a surprising reduction of 3% from the previous month for 1 bedroom apartments dropped $300 $2000 per month, a 1% drop, and 2 bedroom units fell 4% to $2130 and two bedrooms fell 1.1% to $2600 (down $100).

Largest Rent Increases and Biggest Drops

Other US Cities with notable rises in apartment rents include – Indianapolis, Cleveland, Tucson, St Louis, Newark, Detroit, Colorado Springs, Winston Salem, Wichita, Milwaukee, Scottsdale and Raleigh.

Other US Cities with the largest drop in prices included Laredo, Madison, Lincoln, Chesapeake, Baltimore, Tulsa, Seattle, Philadelphia, and Providence.

The US southeast continues to be the destination of choice for renters although some mid-sized cities in the Northeast are seeing growth.

The big eye opener in rent decreases is in 2 bedroom rentals who have suffered through 20%+ drops year over year.

The worst affected cities were San Francisco, Buffalo, New York, Oakland, Los Angeles, Boston, Seattle, Washington DC, San Jose and Cincinnati. Many cities in Texas have seen strong drops.

One Bedroom Rentals

In terms of year over year rent price increases for 1 bedroom rentals, the numbers are eye-opening:

One bedroom price increases from October included:  Indianapolis (8.7%), Cleveland (8.4%), Tucson (8.3%), St Louis (8.2%), Newark (8.1%), Detroit (7.9%), Winston Salem (5.3%) and Colorado Springs (5.3%).  Landlords in these cities are enjoying the price trends.

2 Bedroom Rentals

The trend was not as evident in 2 bedroom apartment rentals with only a few showing huge increases from 12 months agao. However, the migration trend is evident as units in these cities begin to dry up.

Here are cities with big price growth for 2 bedroom rentals over the last 12 months:  St Petes (24.3%), Sacramento (24.1%), Cleveland (24%), Detroit (21%), Albuquerque (19.8%), Jacksonville (18.8%), Indianapolis (16.7%) and Newark (16.1%).

It’s easy to see the trend in these cases. It’s a migration to cities with more inventory, lower prices, and perhaps better weather, since cold winter weather is more expensive.  Some in California may move to remote cities, yet not leave the state.

Please do share this report with friends and associates on Facebook!

In a recent Inman report on the Multifamily sector, multifamily rents fell .4%, well down from last year’s 2.6% growth. They report annual rent declines in cities such as San Jose (-4.6 percent) and San Francisco (-3.8 percent) while cities such as Indianapolis and Kansas City saw rises.

Cities and States Responding

There are several cities and states responding with their own moratoriums on evictions. However, allowing tenants not to pay rent for months on end is likely yet one more disaster for landlords to contend with.  Apartment and multifamily landlords in some major inner-city metros are at risk.

Real estate sites are reporting increased numbers of New Yorkers searching online for homes to buy. Many renters may be on the move trying to find cheaper rentals and they’re leaving their Manhattan apartments behind.

The rent vs buy question may be moving back to home purchases in the 2nd half of 2020 and into the 2021 recovery period.

US Apartment Rent Prices By City

Pos.CityPriceM/M %Y/Y %PriceM/M %Y/Y %
1San Francisco, CA$2,700-3.60%-22.60%$3,570-3.30%20.70%
2New York, NY$2,470-3.10%-16.80%$2,800-3.40%18.40%
3Boston, MA$2,150-2.70%-14.00%$2,600-3.00%11.90%
4San Jose, CA$2,090-1.40%-14.70%$2,650-1.10%-8.60%
5Oakland, CA$2,000-1.00%-19.00%$2,600-1.10%13.00%
5Los Angeles, CA$2,0000.00%-9.50%$2,720-2.20%12.30%
7Washington, DC$1,920-2.00%-12.70%$2,7000.70%10.00%
8San Diego, CA$1,7900.00%0.60%$2,340-1.30%-0.40%
9Miami, FL$1,710-2.30%0.00%$2,280-1.30%3.60%
10Fort Lauderdale, FL$1,7001.20%6.30%$2,2001.40%1.90%
10Santa Ana, CA$1,7003.70%2.40%$2,2902.70%8.00%
12Anaheim, CA$1,6602.50%2.50%$1,990-0.50%-2.50%
13Newark, NJ$1,6008.10%21.20%$1,800-1.10%16.10%
14Providence, RI$1,570-3.10%11.30%$1,8001.70%11.10%
15Scottsdale, AZ$1,5504.70%6.90%$2,1005.00%1.40%
15Long Beach, CA$1,550-1.30%0.00%$2,1002.90%5.00%
17Seattle, WA$1,540-3.80%-17.20%$2,030-3.30%11.70%
18Honolulu, HI$1,500-1.30%-6.30%$2,100-2.80%0.00%
19Chicago, IL$1,470-2.00%2.10%$1,790-0.60%5.30%
19New Orleans, LA$1,4702.80%4.30%$1,7000.00%9.70%
21Atlanta, GA$1,460-0.70%2.10%$1,9000.00%4.40%
21Sacramento, CA$1,4600.70%15.90%$1,8004.00%24.10%
23Philadelphia, PA$1,440-3.40%-4.00%$1,700-2.90%3.70%
24Denver, CO$1,4201.40%-6.60%$1,910-0.50%0.50%
25Portland, OR$1,4000.00%-2.10%$1,750-2.80%2.90%
26Minneapolis, MN$1,3000.80%-5.80%$1,780-2.20%-2.20%
26Chandler, AZ$1,3000.80%7.40%$1,5402.00%8.50%
26Gilbert, AZ$1,3000.00%5.70%$1,5700.00%9.80%
26St Petersburg, FL$1,3002.40%23.80%$1,7404.20%24.30%
30Austin, TX$1,2900.80%4.90%$1,6000.60%3.20%
31Nashville, TN$1,260-0.80%-11.30%$1,4300.70%-2.70%
32Dallas, TX$1,2501.60%5.00%$1,6801.80%5.00%
33Henderson, NV$1,2402.50%9.70%$1,3700.70%3.00%
34Baltimore, MD$1,220-4.70%6.10%$1,530-5.00%9.30%
35Orlando, FL$1,2100.80%-3.20%$1,4000.70%0.00%
36Richmond, VA$1,2000.80%12.10%$1,380-2.10%3.00%
36Charlotte, NC$1,200-1.60%0.00%$1,410-1.40%8.50%
38Tampa, FL$1,1900.00%6.30%$1,4100.70%6.00%
39Chesapeake, VA$1,180-4.80%3.50%$1,250-3.10%1.60%
40Cleveland, OH$1,1608.40%23.40%$1,2406.90%24.00%
41Durham, NC$1,1500.90%7.50%$1,2803.20%7.60%
42Plano, TX$1,1404.60%-3.40%$1,5102.70%-5.00%
42Pittsburgh, PA$1,1402.70%-2.60%$1,3403.10%-0.70%
44Virginia Beach, VA$1,1304.60%7.60%$1,2800.00%4.90%
44Fresno, CA$1,1303.70%18.90%$1,3603.00%15.30%

Above data courtesy of the November Zumper Rental report.

You can view the full set of rental stats on the Zumper website:  zumper.com/blog/rental-price-data/. Zumper’s a great company so definitely visit their website for apartment rentals and at the big property managment conferences and trade shows when they resume after the pandemic.

Will Rents Keep Rising?

Some rental market experts were calling for drastic rental apartment price drops this summer and fall.  If renter aid programs and income supplement programs are curtailed, then their projections might come true.

The number of renters making rent payments on time decreased slightly, but overall renters appear to be taking their rent payment responsibilities seriously.

The key drivers of high rent prices are:

  1. high real estate prices
  2. employment picture better in some cities
  3. low vacancy rates
  4. constrained housing supply
  5. migration out of big cities and pandemic destinations
  6. high employment (only in some cities)
  7. reduced new apartment or house construction
  8. local building regulations
  9. high construction costs
  10. investor expectations of returns
  11. younger renter demographics (Millennials who can’t afford to buy)

Additionally, the residential housing market has moved to single family home ownership rather than multifamily rental construction according to the latest report from multifamily executive.

 

Apartment construction was brisk back in 2017. However, since then construction rates have plummeted despite low financing rates, improving economy, and rising demand.  Although the Realpage graphic doesn’t show the last 3 quarters, we can forecast the new builds being markedly lower. As the economy passes the pandemic period, we can shortages causing upward pressure on apartment rental prices in 2021.

Housing Supply Declining

Screenshot courtesy of Realpage

 

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The National Outlook for Apartment Rentals

Before the Corona Virus Pandemic hit the US,  several data collection and forecasting sources believed rent prices would continue their rise. Covid 19 has wreaked tough times for apartment owners.  While the pandemic will pass, a return of renters to the inner city, or overcrowded neighborhoods in the major metros is uncertain.

It’s likely that companies have adjusted their views on remote work for employees, and they will likely try to harvest the cost savings of remote workforces, rather than demand a return to dense offices downtown.

Still, the demographics of each market likely isn’t shifting sufficiently as both older and younger homeowners and renters have been on the move. As more properties become available, we could see a time soon when retired homeowners decide to sell.

Which Cities will Have the Youngest Population of Renters?

As this chart shows, cities with the youngest renters have the most potential renters. However, average household income and apartment property prices will determine whether they’re a good bet for the next  5 to ten years for investors. Texas, Utah, and California are the most youthful states.

RankCityMedian Age
Household Income
1Jacksonville, NC23$41,300
2Provo, UT23$40,360
3New Brunswick, NJ24$38,400
4Florence-Graham, CA25$35,500
5College Station, TX25$33,400
6West Jordan, UT25$69,400
7Orem, UT25$54,000
8Laredo, TX25$39,400
9Lynwood, CA26$35,900
10Madera, CA26$42,000
11Edinburg, TX26$42,500
12Killeen, TX26$48,300
13Brownsville, TX26$32,300
14Pharr, TX26$34,700
15Bloomington, IN26$50,000
16Compton, CA27$43,200
17Huntington Park, CA27$36,400
18Paramount, CA27$44,900
19Layton, UT27$66,700
20Fontana, CA27$65,000
22Santa Ana, CA27$53,300
23Cicero, IL27$51,900
24Rialto, CA27$50,300
25West Valley City, UT27$52,800
Dallas, TX32$63,800
San Francisco, CA39$78,400
Boston, MA39$58,300
Source: US Census Bureau

Why Will Apartment Rents Rise in 2021?

Apartment rents and landlord revenues are decreasing for most, yet there are cities and neighborhoods where prices are rising and could rise even further. These are desirable locations and there is a demand for 1 bedroom units.

For the next 5 year forecast however, with construction subdued, we may see prices rise:

  1. renters income rising faster than rent prices
  2. demand growing from Millennials and incoming Generation Z
  3. more renters now compared to those who own homes
  4. many hot city markets have real estate prices too high for many to buy
  5. construction starts not keeping up with demand
  6. interest rates rising causing some mortgage holders to sell
  7. population is more mobile hence may not want to buy a home/condo
  8. % of cost-burdened renters in the U.S. still high at 49.7%
  9. credit is tightening

Investors should key in on specific neighborhoods and cities to find rental apartment properties worthy of investing in. There’s still room for capital gains in these cities. Improve your profits further with a good apartment management software solution.

Apartment Rent Forecast

With moderate inflation and high demand from young renters, and demand from older affluent renters, it is difficult to support a lower rental price in New York, San Francisco, Los Angeles let alone the pandemic destination cities.

Screenshot courtesy of Statista.

As you can see in this graphic below courtesy of Apartment List, some cities are enjoying phenomenal growth. Definitely worth investigating the sources/factors in why they are the highest performing cities for apartment rental.

Cities with the Best Rental Price Potential

Graphic Screenshot Courtesy of Apartment List

 

The Best Apartment Management Software

Investing in the right cities is a lot like choosing the best rental management software technology to manage it. For small portfolio managers, a simple, efficient solution makes your workload easier.

Check out ManageCasa’s all in one, simplified property management software for property management companies. Book a demo and see why so many property managers are excited about ManageCasa.

 

See also:  Apartments for Rent | House RentalHow to Keep TenantsSet Rent PriceWill Rent Prices Drop?Property Management Companies | Covid Disinfection | Covid FoggerProperty Management Marketing |  Apartment Management Software | Which Apartment Type is Best?Will House Prices Drop? | Rental Housing | How to Reduce Tenant Vacancy | Online Rent PaymentBest Property Management Software

 

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