Apartment Rent Prices Rise
As we progress through the month of July 2020, we’re seeing the moving season in full swing. And apartment rental listing website Zumper is reporting rising apartment rental prices from June and vs 12 months ago.
Renters are on the move to cheaper neighborhoods and cities, away from dense urban areas. A surprising list of cities are seeing rent price growth.
The average one bedroom apartment for rent now 1% higher to a new median rent price of $1,229 per month. And 2 bedroom apartment rent prices grew 0.8% to $1,485 per month. Combined, over the last year, apartment rent prices have risen 0.4%.
Is the Pandemic Creating These Changes?
The rise in apartment rents has to be a surprise to many who sincerely believe the pandemic shutdown is causing a collapse of the rental apartment market in the US.
Many could be wondering if the recent 2nd wave infections in Florida, California and Texas will result in lower rent prices and more evictions. Texas and California cities were among those with dropping rents in June. Florida cities however, have not shown up as the big price losers last month.
Miami, Fort Lauderdale, St Petes, and Tampa had rising rental prices, while Tallahassee saw a 2% drop.
California Rent Prices
In some cities in California, the trend is the opposite — to lower apartment rent prices. San Francisco’s rent prices for one bedroom units fell 11.8% 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 up in price becoming the 4th most expensive market in the nation. Still, Oakland one bedroom rent prices fell 2.1% to $2300 per month.
A few cities across the US saw huge increases in rent. Lexington Kentucky saw its rent prices increase 5.6%, the largest monthly gain in the country. Anchorage Alaska was next with a 5.5% increase to an average of an inviting $960 per month.
Augusta Georgia saw their average rents mount 5.3% last month, while Akron, Ohio had rents grow by 5.2% to an average $610 per month for one bedroom apartments and 1.4% for 2 bedroom units. Portland Oregon had rents rise 5.2% to $1420 per month and up 3.6% to $1750 per month for 2 bedroom apartments.
Madison Wisconsin saw the largest drop in rents (1 bedroom units down 5.3% and 2 bedroom units down .8%). they were closely followed by San Jose Ca which saw one bedroom rent prices drop 5% and two bedroom units drop 3.1% in June.
A trend to moving away from Manhattan and New York City is opening up huge vacancies in the NYC area. Real estate sites are reporting increased numbers of New Yorkers searching online for homes to buy. The rent vs buy question may be moving back to home purchases in the 2nd half of 2020 and into the 2021 recovery period.
|1 Bedroom||2 Bedrooms|
|City||Price||M/M %||Y/Y %||Price||M/M %||Y/Y %|
|3||San Jose, CA||$2,300||-5.0%||-8.0%||$2,860||-3.1%||-4.7%|
|6||Oklahoma City, OK||$750||0.0%||4.2%||$880||-2.2%||0.0%|
|7||Corpus Christi, TX||$830||-2.4%||-2.4%||$1,050||-1.9%||-0.9%|
|8||San Francisco, CA||$3,280||-2.4%||-11.8%||$4,340||-1.8%||-9.6%|
|19||Los Angeles, CA||$2,150||-0.9%||-3.6%||$2,960||-0.7%||-5.1%|
Above data courtesy of 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 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:
- 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.
Having difficulties Managing your Rental Properties? Why not check out a simple property management software solution for investors and apartment managers having portfolios of 5 to 500 units. Ease your paperwork, stress, and get better results with ManageCasa property management software.
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 | Property Management Services | Property Management Marketing | Apartment Management Software | Apartments for Rent | Renters Insurance | Rental Housing | How to Reduce Tenant Vacancy | Property Management Solution | Starting a Property Management Business | How to Use Property Software | Best Property Management Software