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Rent Prices USA

September 01, 2022

August Rent Price

Surprisingly, after a short dip in early summer, the average rent price for an apartment in the US is rising again.

According to Zumper’s rent price report for August, price growth is accelerating and one bedroom rents actually hit a new record. Strong jobs, wages, and low availability continue to accelerate rent prices.

The price pressure and lack of availability is forcing apartment and house hunters to become more creative to find a place to live.  Some are willing to move to a new location, find something with fewer bedrooms and amenities.  Some are moving in with others, and pursuing shorter term leases.

Rent.com reports that 92% of US one bedroom rental markets are showing rising prices and only 7% have fallen. The demand for rental apartments is so strong, bidding wars are now common.

Screenshot courtesy of Statista.

The growth rate of apartment prices in the US may have tailed off substantially, however many cities are seeing strong growth in prices. Zumpers stats show strong demand in smaller cities.

High rent prices in themselves sets forth a process where renter churn happens. When it does, some landlords may be free to reset prices to levels they need to keep their businesses profitable. Increasingly, inflation today means landlords too themselves are under cost pressures and many haven’t recovered from the pandemic.

Multifamily Construction Set to Cool Off

The multifamily construction sector had been adding quite a few units to the rental pool, yet concerns are that stream of new apartments and condos is now fading off. Multifamily and apartment developments are affected by interest rates, and with rumored recessionary trends, it’s logical, that construction rates will dive in 2023.

A lack of supply drives the single family rental market and to some extent the apartment rental sector too. Just because low quality rental apartments are available, doesn’t mean they’re necessarily in demand either. The preference of renters is for roomier units, better amenities, and locations near to workplaces.

There’s plenty of talk of a recession and how renters might be willing to pay less for apartments, yet frustrated home buyers will be staying in the rental pool for sometime. Housing is expensive and mortgage rates and qualifying criteria will dash the dreams of many prospective buyers. Demand for apartments for rent should be strong for several years.

Zumper’s Rental Report

During August, the median national rent for 1-bedroom apartment rose .3% to $1,233 (up 0.3%) and the median two-bedroom rent rose .6% to $1,493.   And YTD, 1 bedroom rose up 0.7% and two-bedroom rents rose 1% vs 2021.

Although there was a belief in moderating rent prices, the stats clearly show rents in most cities are still rising. With the jobless claims report out today, showing claims down, it likely means the Fed will raise rates strongly to try to bring inflation down.

Inflation is causing considerable pain for renters and is no doubt suppressing prices they’re willing to pay, yet competition for units is intense. And as Zumper’s August rent price history chart reveals, rents are gaining upward momentum, perhaps because of late, wages and employment remain strong, inflation may have taken a breather.

National rent price growth

Screenshot courtesy of Zumper. National rent price growth

 

Is the Downward Rent Trend Ending?

As the graphic from Apartmentlist below shows, 2022 is nothing like 2021, yet prices are above previous years. Historically, rent prices decline after August.

Last month, Apartmentlist found that rent prices half a percent during August, down from one percent the previous month. They state that apartment rents have risen a little faster than before the pandemic.  Their data shows that year to date, rents have jumped 7.2%, yet that is down vs last years sizzling hot rate of 14.8%. Year-over-year rise was 10%, which is well down from the 18% it was at the beginning of 2022.

Rent price history.

Rent price history. Chart courtesy of Apartmentlist.com

Rental Price History

Many people ask if rent prices will fall, but here is the long term view of rent prices in the US.

History of Rent Prices in USA St Louis Fed

History of Rent Prices in USA. Screenshot courtesy of FRED.

 

Apartment Rent Trends in Big US Cities

From Zumper’s latest rent price report shows renters are flocking to more affordable states that may feature lower taxes, better quality of life, warmer/moderate climate, but also they’re returning to work in major centers.

What’s remarkable about the major metros is how much rents have grown in the last year alone. 6% growth in last month alone shows these rental markets are strong. Demand persists and renters are willing to pay the price.

Top Price Growth (Zumper Data)

1 Bedroom2 Bedroom
RankingCityPriceM/M%Y/Y%PriceM/M%Y/Y%
96Lexington, KY$8106.60%5.20%$1,1205.70%12.00%
83Corpus Christi, TX$9906.50%16.50%$1,2705.80%17.60%
80Milwaukee, WI$1,0006.40%5.30%$1,1905.30%8.20%
43Richmond, VA$1,3606.30%27.10%$1,5400.70%18.50%
44Durham, NC$1,3506.30%7.10%$1,6301.20%15.60%
63Columbus, OH$1,1906.30%26.60%$1,250-1.60%13.60%
78Cincinnati, OH$1,0106.30%9.80%$1,2800.80%16.40%
5San Diego, CA$2,5806.20%29.00%$3,2605.80%20.70%
41Chesapeake, VA$1,3706.20%24.50%$1,4206.00%9.20%
59Cleveland, OH$1,2206.10%-5.40%$1,2705.80%-5.20%
28Chandler, AZ$1,5806.00%3.90%$1,9401.60%11.50%
38Phoenix, AZ$1,4206.00%18.30%$1,7101.80%13.20%
57Norfolk, VA$1,2306.00%20.60%$1,4504.30%19.80%
57Raleigh, NC$1,2306.00%4.20%$1,600-1.20%18.50%
65Buffalo, NY$1,1205.70%6.70%$1,2000.80%5.30%
88Baton Rouge, LA$9205.70%10.80%$1,0900.00%11.20%
4Boston, MA$2,7305.00%18.70%$3,1705.70%16.10%
44Glendale, AZ$1,3504.70%25.00%$1,6501.20%24.10%
89Tallahassee, FL$9004.70%11.10%$1,2004.30%23.70%
41Mesa, AZ$1,3704.60%24.50%$1,690-0.60%18.20%
39Virginia Beach, VA$1,4004.50%13.80%$1,630-0.60%16.40%
10Santa Ana, CA$2,1604.30%18.00%$2,770-4.80%20.40%
23Urban Honolulu, HI$1,6904.30%15.80%$2,3006.00%7.00%
78Winston Salem, NC$1,0104.10%18.80%$1,1405.60%15.20%
1New York, NY$3,9304.00%39.90%$4,4006.00%46.70%
24Sacramento, CA$1,6603.80%11.40%$1,920-1.50%2.70%
68Indianapolis, IN$1,0903.80%17.20%$1,2703.30%27.00%
53Pittsburgh, PA$1,2903.20%14.20%$1,5402.00%13.20%
44Newark, NJ$1,3503.10%8.00%$1,7704.70%16.40%
50Aurora, CO$1,3403.10%17.50%$1,800-0.60%13.20%
80Tulsa, OK$1,0003.10%38.90%$1,110-2.60%23.30%
73St. Louis, MO$1,0203.00%9.70%$1,3501.50%7.10%
98Lubbock, TX$7202.90%5.90%$9201.10%8.20%
34Philadelphia, PA$1,4702.80%8.90%$1,7701.10%4.10%
68Louisville, KY$1,0902.80%22.50%$1,2805.80%29.30%
31Fresno, CA$1,5402.70%40.00%$1,740-0.60%21.70%
3San Jose, CA$2,7802.60%26.40%$3,2800.90%20.60%
13Anaheim, CA$1,9502.60%10.80%$2,7003.80%25.00%
44Madison, WI$1,3502.30%5.50%$1,450-2.00%-2.70%
7Los Angeles, CA$2,4502.10%19.50%$3,2901.20%17.50%
73Rochester, NY$1,0202.00%0.00%$1,2000.00%-5.50%
16Tampa, FL$1,8001.70%34.30%$2,0400.50%28.30%

What’s astonishing about the rising rents, is how much they’re up from 12 months ago. And inflation may have eased, rent prices are in a world of their own, rising 30% to 40% in some cities.

In San Francisco, 1-bedroom rent prices fell 1.9% from $3040 per month. 2-bedroom units rose .7% to$4,200 per month.

In New York, 1 bedroom apartments rose 4% to$3,930 per month last month and are up 40% year over year, while 2 bedroom units rose 6% to $4,450 per month which is up 46% year over year.

In Boston, 1 bedroom rent prices rose 5% to $2730 per month, while 2 bedroom rents rose 5.7% to $3170 per month.

In Washington DC, 1 bedroom apartment rents fell 1.7% to $2370 while 2 bedroom rents rose .3% from last month to $3,240 this month.

Miami saw it’s one bedroom apartment rents rise .8% to $2520 a month, which is up 34% from 12 months ago. Two bedroom units rose 3.3% to $3,410 per month.

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 decision is leaning back to renting despite the brisk growth in rent prices.

Will Rent Prices Keep Rising?

As the charts revealed, the home buying market is being decimated, resulting in more commitment to the rental market by renters. It’s difficult to forecast home prices throughout the next 5 years, yet with home construction down, inflation high, and Americans savings accounts in strong position, with good employment outlooks, there might be good pressure for rent price rises.

The rental property market looks promising resulting in continuous demand for property management software, property management services, and rental units themselves.

Of recent, the number of renters making rent payments on time has 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. intense demand for rentals
  3. employment picture better in some cities
  4. low vacancy rates (few are moving, low churn)
  5. constrained housing supply
  6. migration out of big cities and out of pandemic destinations
  7. high employment (only in some cities)
  8. reduced new apartment or house construction
  9. local building regulations reduce new rental unit development
  10. NIMBY action at local level prevent development of multifamily buildings
  11. high construction costs for multifamily developments and apartment buildings
  12. investor expectations of returns
  13. younger renter demographics (Millennials who can’t afford to buy will rent instead, and fast rising numbers of Gen Z’s)

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 below 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

NMHC, in its recent report predicts demographic growth is expected to generate demand for another 3.7 million new
rental properties with 5 or more units through 2035. While construction was strong this year, it will likely decline in 2023 given expectations of a recession. Builder confidence is down.

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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?

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.

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: Property Management Tips | Property Management Software | Apartments for Rent | House RentalSet Rent Price | Texas Housing Market | | Credit Checks for Tenants | Will Rent Prices Drop?Property Management Company Near Me | Moving Companies |  Property Management Marketing | Which Apartment Type is Best? |Rental Housing | Property Management Accounting Software

 

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