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Apartment Rental Prices USA

September 13, 2019

Apartment Rent Prices Rise

Amidst a market where affordability and rent controls are the subject of activist pro rent control protests, rent prices appear to rising fast in 2019.

Zumper reports that rents are growing strongly again in September while new construction starts at their lowest in several years. Multifamily starts have plummeted according to Census Bureau data.

Screen Capture courtesy of Zumper

Zumper reveals apartment rental prices are highest in California with San Francisco, San Jose, Oakland, Los Angeles, San Diego, Anaheim, and Long Beach leading the way in the Golden State. There were reductions in rent prices in some locales, however the average price rise for a one bedroom in the US rose 1% to $1,250, and 2 bedroom rentals increased 0.5% to $1,493. YoY, 1 and 2 bedroom rent prices are up 2.4% and 2.2%, respectively according to Zumper.

Oakland, Boston, New York, Providence RI, Portland OR, Charlotte NC, Newark NJ, Chandler AZ, Boise ID, Reno NV, Mesa AZ, and Chattanooga TN all had big increases YoY. Houston, Buffalo, and Baltimore saw the sharpest rent decreases.

Highest Rent Prices September 2019

US Highest rents – screen capture courtesy of Zumper

Will Rents Keep Rising?

The factors that drive high and rising rents seem to be in place. And this may be a lull in the action. Some economists are adjusting their outlook on the economy and are suggesting there may be little in the way of recession in 2020.

The key drivers of high rent prices are:

  1. high real estate prices
  2. low vacancy rates
  3. rising incomes
  4. high employment
  5. reduced new construction
  6. local building regulations
  7. high construction costs
  8. investor expectations of returns
  9. younger renter demographics (Millennials who can’t afford to buy)
  10. lack of homes or condos to purchase at affordable prices

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

Construction has been brisk from 2015, yet the need for new apartments is above 328,000 per year which is unlikely to be fulfilled. That would point to a forecast of higher rental prices in the coming years. According to Realpage, occupancy rates hit a 2 decade high of 96% in May.

Rental unit construction was high in 2017/2018, but the new releases are about to slow considerably. The build to rent sector is doing well, but overall construction has slowed, particularly in the affordable housing sector.

The market is on track to deliver over 250,000 new units in Reis’ top 82 markets in 2017, the highest level of new-supply growth since the late 1980s -excerpt from multifamilyexecutive.com report.

 

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The National Outlook for Apartment Rentals

Several data collection and forecasting sources believed 2018 would be a flat year for apartment rental prices, just as they believe housing prices will remain flat. However, now in 2020, we’ve seen rent prices continue their rise. Nothing seems to slow the apartment rental market.

Demand for Apartment Rentals is Sure to Rise: Urban Institute

This quote from Urban Institute tells us that demand will only grow. There forecast of apartment rentals show renters will exceed owners by 4 million.

Our analysis projects that from 2010 to 2030, the growth in rental households will exceed that of homeowners by 4 million, with an increase of 13 million rental households and 9 million homeowner households. That’s five renters for every three homeowners. Compared with the previous 20 years, the increase in homeowners was almost twice that of renters, even with the housing crash: 8.8 million new rental households and 16.1 million new homeowner households. — from blog post on urban.org.

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?

While price trends have trended lower in the last 6 months, here’s 8 reasons why rents will likely rise in the next two years:

  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 tight

If apartment rental prices do remain flat for 2018 nationally, there are still cities that are growing fast and therefore demand and prices should continue to rise in them.

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

As this chart from Apartment List shows, apartment rents have leveled off for many months now. We’ve seen this lull in home prices too. The market might be trying to figure out where it’s headed for the next few years.

Graphic Courtesy of Apartment List

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 the best growing cities in Texas, California, and Florida.

Screen Capture courtesy of Statista https://www.statista.com/statistics/200223/median-apartment-rent-in-the-us-since-1980/

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 peforming cities for apartment rental.

Cities with the Best Rental Price Potential

Graphic Screenshot Courtesy of Apartment List

CityAverage Rent Price
Detroit, Michigan$1,000
Cleveland, Ohio$1,000
New York, New York$4,100
Buffalo, New York$1,000
Toledo, Ohio$680
Philadelphia, Pennsylvania$1,500
Milwaukee, Wisconsin$1,100
Baltimore, Maryland$1,200
Memphis, Tennessee$750
Pittsburgh, Pennsylvania$1,100
Mesa, Arizona$1,990
Chicago, Illinois$1,800
Corpus Christi, Texas$970
Orlando, Florida$1,300
Louisville, Kentucky$890
Kansas City, Missouri$940
Cincinnati, Ohio$940
Fort Wayne, Indiana$730
St. Paul, Minnesota$1,400
St. Louis, Missouri$880
st louis, missouri$880
Jersey City, New Jersey$2,800
Dallas, Texas$1,150
El Paso, Texas$750
Columbus, Ohio$880
Greensboro, North Carolina$840
Fort Worth, Texas$1,050
Fort Lauderdale, Fl$1,800
New Orleans, Louisiana$1,090
Tampa, Florida$1,200
Jacksonville, Florida$990
Atlanta, Georgia$1,300
Minneapolis, Minnesota$1,480
Tulsa, Oklahoma$680
San Antonio, Texas$1000
Charlotte, North Carolina$1,150
Boston, Massachusetts$3,250
Durham, North Carolina$1,100
Oklahoma City, Oklahoma$740
Lincoln, Nebraska$900
Omaha, Nebraska$870
Miami, Florida$1,600
Lexington, Kentucky$870
Nashville, Tennessee$1,260
Wichita, Kansas$630
Raleigh, North Carolina$1,100
Raleigh, North Carolina$1,100
Newark, New Jersey$1,150
Tucson, Arizona$800
Albuquerque, New Mexico$840
Virginia Beach, Virginia$1,100
Fresno, California$980
Aurora, Colorado$1,300
Bakersfield, California$930
Phoenix, Arizona$930
Sacramento, California$1,300
Sacramento, California$1,300
Las Vegas, Nevada$970
Colorado Springs, Colorado$1,060
Chandler, Arizona$1,160
Las Vegas, Nevada$960
Riverside, California$1,400
Stockton, California$1,080
Austin, Texas$1,300
Denver, Colorado$1,500
Henderson, Nevada$1,150
Washington, District of Columbia$2,100
Plano, Texas$1,250
Anchorage, Alaska$1,070
Salt Lake City$1,100
Portland, Oregon$1,420
Oakland, California$2,540
Santa Ana, California$1,800
Los Angeles, California$2,300
San Diego, California$2,000
Chula Vista, California$1,600
Honolulu, Hawaii$2,200
Long Beach, California$1,800
Scottsdale, AZ$1,300
Houston, Texas$1,070
Anaheim, California$1,700
Seattle, Washington$1,100
San Francisco, California$3,400
San Jose, California$2,600
Santa Clara, California$2,700
Indianapolis, Indiana$800
San Mateo, CA$3,000
Sunnyvale, CA$2,700
Arlington, Texas$970

 

We’ll be updating this post frequently to add apartment rental data and opportunities in future. Please bookmark!

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.

We welcome your comments on investing in investment property. Tell us how you feel about apartments, condos, houses and flipping in Texas and your investment strategies and challenges.

See also: Best Real Estate Investment | Apartment Management SoftwareApartments for RentRenters Insurance2020 Rental Housing Market | Property Investing in TexasHow to Reduce Tenant Vacancy | Property Management Solution | Tenant Screening Service | Improve Property Revenue | Improve Property Cash Flow | NAR Realtor ConferenceTax Savings for Property Managers | Real Estate Portfolio Tips | Starting a Property Management Business | How to Use Property Software | Best Property Management Software

 

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