Apartment Rental Prices
Rent prices rising and dropping at the same time? It’s an unusual time for the apartment, condo and house rental markets, where migration is creating vacancies in big cities but drying up apartment rentals in smaller cities.
And with the looming end of rent payment moratoriums and the Cares Act payments, the fear is for a tsunami of evictions, plummeting rent prices and rising vacancies for property management firms to fill.
The persistence of the pandemic into August within Arizona, Florida, Texas, California and most other states creates a few worries for America’s landlords and their property managers. The exodus from cities and demand for more affordable apartment units in other cities is the big trend in the US rental market.
Property owners will find it harder to hang onto good tenants, while the worst tenants occupy units without paying. Listing on good apartment for rent sites and attracting quality renters is an increasing priority for landlords.
Demand for Realtors, moving companies and property management companies should be strong for the rest of the year.
Apartment Rent Falling in Big Cities
From Zumper’s latest rent price report covering July, San Francisco and New York saw steepening rent price decreases in July with SF rent prices down 11% and NYC prices down 7%. They found that online Phoenix AZ had the largest increases in rent prices of the major metros.
There are smaller metros that saw rises in rent, and this might reflect improving city economies along with migration outward from the big cities that’s still going on. Work at home, urban crime, high taxes, and Covid 19 fear is pushing more homeowners and renters out of the big cities.
Cities with notable rises in apartment rents include Baltimore, Gilbert AZ, St Petes FL, Henderson NV, Chesapeake VA, Richmond VA, Durham NC, Jacksonville FL, Memphis TN, Tallahassee FL, and Tulsa OK. The US southease appears to be the destination of choice for renters.
Other cities with big one bedroom apartment increases include Sacramento CA (5.1%), Fort Lauderdale FL (3%), Charlotte NC (3.3%), Tampa FL (2.6%), Anchorage AK (2.1%) and Spokane WA (2.5%).
One Bedroom Rentals
The rent trends for one bedroom units and 2 bedroom units was not always consistent. In some cities, the one bedroom prices rose much more strongly.
In terms of year over year rent price increases for 1 bedroom rentals, the numbers are eye opening. Arkon OH (+10.9%), Detroit MI (14.8%), Lincoln NE (+14.9%), Columbus OH (+15.7%), Memphis TN (+13.7%), Bakersfield CA (+13.7%), St Louis MO (15.2%), Chattanooga TN (+15.4%), Cleveland OH (+16.0%), Indianapolis (+16.0%), Reno NV (15.4%), St Petes FL (15.5%) and Baltimore MD (+15.3%) had year over year rent increases that defy the recent monthly price trends.
2 Bedroom Rentals
The trend was not as evident in 2 bedroom apartment rentals with only Buffalo (14.4%), Newark NJ (+16%), Fresno CA (+14%), Rochester NY (+15.3%), Des Moines IA (+15.1%), Chattanooga TN (+15.7%), Detroit MI (+15.9%) showing huge increases. However, the migration trend is evident as units in these cities begin to dry up.
In an Inman report on the Multifamily sector, multifamily rents fell .4% last month, 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 content with. Landlords in major cities are at risk.
From a Zumper report, the average one bedroom apartment for rent rose .3% to a new median rent price of $1,233 per month. And 2 bedroom apartment rent prices grew 0.6% to $1,493 per month. Combined, over the last year, apartment rent prices have risen 0.4%.
Henderson NV took top spot for rising prices which rose 5.4% where it ranks 36th now in the nation for rent prices. Tulsa OK also rose 5.1% to $620 per month for one bedroom apartments and up 1.2% for two bedroom units.
California Rent Prices
In some cities in California, the trend is to lower apartment rent prices. San Francisco’s rent prices for one bedroom units fell 11% year over year and two bedroom rentals fell 10% from 12 months ago. San Jose saw rents drop 5%.
Compared to last month, one-bedrooms in San Francisco fell 2.4% to $3,280 per month while two-bedroom apartments dropped 1.8% to $4,340 per month. Oakland California picked is the 5th most expensive market in the nation. Still, Oakland one bedroom rent prices fell again in July by 3.5% to $2900 per month.
Rent Prices in More US Cities
In July, as mentioned above, a few cities across the US saw huge increases in rent. Baltimore MD had apartment rents rise 15.3% YoY to $1260 per month. 1 bedroom apartments in Chesapeake VA rose 14.1% YoY and one bedroom rents jumped 14.9% in Lincoln NE year over year.
A trend to moving away from Manhattan and New York City is opening up huge vacancies in the NYC area. In NYC, one rents dropped 1.7% to 2840 per month and 2 bedrooms decreased .3% to $3200. Boston too saw rent prices fall 7% year over year. One bedroom units in Boston dropped 3.1% to $2800.
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.
The rent vs buy question may be moving back to home purchases in the 2nd half of 2020 and into the 2021 recovery period.
Zumper Rent Prices July
If you’re someone who watches market momentum, the recent steepening of year over year price changes should be an eye opener.
In this data from Zumper, we see the biggest rises are in cities in the south, mostly southeast seeing the fastest rising rents in July. Only Boise ID, Anchorage AK, and Baltimore made it into the top cities. So the additional trend to the US south should be noted.
US Apartment Rent Prices By City
|1 Bedroom||2 Bedrooms|
|Pos.||City||Price||M/M %||Y/Y %||Price||M/M %||Y/Y %|
|10||St Petersburg, FL||$1,270||3.30%||15.50%||$1,630||1.90%||5.20%|
|14||Fort Lauderdale, FL||$1,700||3.00%||3.00%||$2,230||1.40%||6.20%|
|19||Winston Salem, NC||$820||2.50%||6.50%||$900||2.30%||8.40%|
|29||El Paso, TX||$690||1.50%||6.20%||$800||0.00%||1.30%|
|30||New Orleans, LA||$1,400||1.40%||-2.10%||$1,650||2.50%||7.80%|
|32||Baton Rouge, LA||$830||1.20%||1.20%||$910||-3.20%||0.00%|
|34||Colorado Springs, CO||$1,000||1.00%||7.50%||$1,300||4.00%||8.30%|
|40||San Jose, CA||$2,300||0.00%||-9.40%||$2,820||-1.40%||-5.70%|
|42||San Diego, CA||$1,750||0.00%||0.00%||$2,300||0.00%||-4.20%|
|43||Long Beach, CA||$1,600||0.00%||3.20%||$2,070||3.00%||-1.40%|
Above data courtesy of the July Zumper Rental report.
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 recent rise in Covid 19 cases makes some wonder about a coming business shutdown to regain control. The would certainly put pressure on those landlords already seeing several months of rent due. And it would start to affect landlords who up to this point haven’t seen many rent defaults.
The key drivers of high rent prices are:
- high real estate prices
- low vacancy rates
- rising incomes
- high employment
- reduced new construction
- local building regulations
- high construction costs
- investor expectations of returns
- younger renter demographics (Millennials who can’t afford to buy)
- 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.
Apartment construction was brisk and hit a high 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.
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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.
|3||New Brunswick, NJ||24||$38,400|
|5||College Station, TX||25||$33,400|
|6||West Jordan, UT||25||$69,400|
|17||Huntington Park, CA||27||$36,400|
|22||Santa Ana, CA||27||$53,300|
|25||West Valley City, UT||27||$52,800|
|San Francisco, CA||39||$78,400|
|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:
- renters income rising faster than rent prices
- demand growing from Millennials and incoming Generation Z
- more renters now compared to those who own homes
- many hot city markets have real estate prices too high for many to buy
- construction starts not keeping up with demand
- interest rates rising causing some mortgage holders to sell
- population is more mobile hence may not want to buy a home/condo
- % of cost-burdened renters in the U.S. still high at 49.7%
- 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.
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.
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
|City||Average Rent Price|
|New York, New York||$4,100|
|Buffalo, New York||$1,000|
|Corpus Christi, Texas||$970|
|Kansas City, Missouri||$940|
|Fort Wayne, Indiana||$730|
|St. Paul, Minnesota||$1,400|
|St. Louis, Missouri||$880|
|st louis, missouri||$880|
|Jersey City, New Jersey||$2,800|
|El Paso, Texas||$750|
|Greensboro, North Carolina||$840|
|Fort Worth, Texas||$1,050|
|Fort Lauderdale, Fl||$1,800|
|New Orleans, Louisiana||$1,090|
|San Antonio, Texas||$1000|
|Charlotte, North Carolina||$1,150|
|Durham, North Carolina||$1,100|
|Oklahoma City, Oklahoma||$740|
|Raleigh, North Carolina||$1,100|
|Raleigh, North Carolina||$1,100|
|Newark, New Jersey||$1,150|
|Albuquerque, New Mexico||$840|
|Virginia Beach, Virginia||$1,100|
|Las Vegas, Nevada||$970|
|Colorado Springs, Colorado||$1,060|
|Las Vegas, Nevada||$960|
|Washington, District of Columbia||$2,100|
|Salt Lake City||$1,100|
|Santa Ana, California||$1,800|
|Los Angeles, California||$2,300|
|San Diego, California||$2,000|
|Chula Vista, California||$1,600|
|Long Beach, California||$1,800|
|San Francisco, California||$3,400|
|San Jose, California||$2,600|
|Santa Clara, California||$2,700|
|San Mateo, CA||$3,000|
Investing in the Rental Property Market using the Right 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.
See also: Apartments for Rent | Set Rent Price | Will Rent Prices Drop? | Property Management Companies | Covid Disinfection | Covid Fogger | Corona Virus Management | Corona Virus Pandemic | Property Management Marketing | Apartment Management Software | Which Apartment Type is Best? | Will House Prices Drop? | Rental Housing | How to Reduce Tenant Vacancy | Collecting Rent | Best Property Management Software