Small Cities Take the Spotlight as April Rents Jump while San Fran, NYC See Big Drops

Key takeaways:

• The average U.S. apartment rent increased by $2 in April, reaching $1,314 according to Yardi Matrix.
• Again the California cities make up the bulk of the rent-growth list, this time with eleven of the top 20 cities located within the state’s borders. In April, Stockton switched places with Lancaster, advancing to the No.1 spot for y-o-y rent growth.
• Manhattan holds strong to its reputation as the nation’s most expensive rental market, with rents north of $4,000/month.
  
• For the third month in a row, SF leads rent decreases, dropping 3.6% over the year.
  
• 203 cities out of the 250 we surveyed saw annual rent growth last month – meaning 81% of the country’s largest cities. Rents decreased in 13 cities, and flat-lined in 34 cities.

Rents are still on the rise, though their growth rate may finally be one renters can find peace with. Jumping just $2 from March, April rents hit $1,314, an increase of only 0.2% for the month and 2% over the year, according to data from Yardi Matrix. That’s a significant reduction in regards to historical performance at this time of the year and is the lowest annual growth rate we’ve seen in more than three years. In fact, in April 2016, rents had jumped 6% over the year – three times this month’s growth rate.

The slowdown in rent growth – at the national level – is expected to continue in the near future, according to Doug Ressler, senior analyst at Yardi Matrix.

“We expect rent growth to moderate in the coming months but it’s not so much a weakening of the apartment sector; it’s more a stabilization and shifting of focus from primary to secondary and tertiary markets, mostly due to a combination of factors, including modest economic growth, ongoing political uncertainty, and a record number of new apartments entering the nation’s tightest markets.” For the moment at least, rent appreciation is slowing down – even in some of the country’s higher-rent cities such as San Francisco and New York City.

Studio Rentals See Biggest Annual Rent Jumps

For studio renters, April came with good and bad news. Over the month, rents grew only minimally, hitting an average of $1,223 – just 0.2% higher than in March. Year over year, though, studio apartment rents jumped by more than 3%, the highest annual increase of all property types.

In April, rents on one-, two- and three-bedroom properties all rose 0.3% – a slight dip over March’s 0.4% growth rate. Annually, one-bedrooms rose 2.9%, two-bedrooms grew 2.6%, and three-bedrooms jumped 2.4%. Average rents on all three property types were $1,187, $1,364 and $1,596, respectively.

Expensive Markets Dip Most Over the Year; OK & TX Cities Get Even More Affordable

It seems the San Francisco rental market is finally – and consistently – moving in the right direction. For the third consecutive month, the Bay Area city has clocked in with the nation’s largest year-over-year drop in rent, falling 3.6% since April 2016. Of course, the city still has a long way to go in terms of affordability; the average rent in San Francisco was $3,355 for the month – the second-highest rent out of all 250 U.S. cities we analyzed.

But San Francisco isn’t the only high-cost city to see big dips in rents over the year. In fact, other historically expensive markets like Manhattan; Cambridge, Massachusetts; and Oakland and Sunnyvale, California, all saw rents drop for April. Still, these cities all boast an average rent of $2,400 a month or more, so optimism should be tempered – they’re far from affordable for your typical American renter.

For a truly inexpensive place to live, renters are better off looking toward the handful of already low-rent cities that saw rents decrease even further year-over-year. Broken Arrow, Oklahoma, for example, has an average rent of just $789, and its rents dropped 2.8% for the year. Three other OK cities fit the bill, too – Oklahoma City, Tulsa, and Norman, with rents of $716, $667 and $868, respectively. Texas had a number of low-rent, high-annual decrease cities as well, including Corpus Christi, McAllen, Pearland, and El Paso. Rents in El Paso are just $740 a month, on average.

U.S. Cities Where Rents Have Fallen Y-o-Y

81% of U.S. Cities See Rents Rise; Cali, Western Cities Pick Up Speed

Once again, California takes the cake as the fastest-growing state in terms of rent. In fact, 11 of the top 20 cities are located within its borders. Stockton came in at top, with a shocking 11.2% jump in rents over the year. It just edged out Lancaster – the top rent-grower for March – which saw rents rise 10.9% annually. The No. 1 and 2 cities had rents of $1,029 and $1,101, respectively. Other Cali cities to make the list were Santa Rosa (No. 5), Sacramento (No. 8), Fairfield (No. 10), El Cajon (No. 12), Victorville (No. 14), Fontana (No. 15), Moreno Valley (No. 17), and Pomona (No. 18).

With a healthy job market and a scenic, coastal backdrop, it’s no surprise that California’s population is ever-growing. But because most jobs are located in high-cost areas like San Jose, San Francisco, and Santa Clara, many who relocate to Cali for jobs end up living on the outskirts – where morning commutes are a welcome sacrifice for more affordable housing. This trend explains why many of the state’s fastest-rent growers are smaller cities, places like Stockton, Modesto and Fairfield. With growing demand for apartment living in these communities, along with a limited inventory of available rentals, rents are spiking in these areas – and will likely continue to do so for the foreseeable future. The same goes for the San Diego metro area; as the popularity of houses for rent in San Diego is waning, interest in apartments is spiking up, along with rent prices, with SD seeing a 1.9% annual jump in apartment rents. At the same time, smaller nearby cities like El Cajon, Escondido, and Chula Vista all posted well above average increases.

But California isn’t the only state seeing a steep rise in rents. A number of Western cities also made the top 20 list, including Colorado Springs, Colorado; Tacoma and Spokane, Washington; Reno, Nevada; Salem, Oregon; Salt Lake City, Utah; and Peoria, Arizona, which has seen rents steadily climb for a few years now. Buffalo, New York, and North Charleston, South Carolina, were the only two non-California or Western cities to make the list.

The Cities with the Fastest Growing Rents – April 2017

Highest Rent Cities See No Movement; KS, OH, OK, TX Come in Low

The nation’s lowest rents all hail from the Midwest and South. Wichita, Kansas, came in with the lowest rent in the entire country (and has for many, many months running), with an average rent of just $630. Two Ohio towns – Toledo and Dayton – also made the top 10, with rents of $664 and $726, respectively. Rounding out the rest of the list were Tulsa and Oklahoma City, Oklahoma; Killeen and Brownsville, Texas; Fort Wayne, Indiana; Independence, Missouri; and Memphis, Tennessee.

The top 10 most expensive cities remained the same for April, with New York, San Francisco and Boston taking the top three spots. New York averaged a rent of $4,094 for the month, while San Francisco and Boston had averages of $3,355 and $3,180, respectively.

To no one’s surprise, the list is largely dominated by Cali cities, including San Mateo, Sunnyvale, Santa Clara, and San Jose. The remaining high-rent cities were Cambridge, Massachusetts; Jersey City, New Jersey; and Brooklyn, New York. Fortunately, it seems like Brooklyn renters can afford it; the NYC borough has seen an explosion of high-income earning renters in recent years, with more than 52,000 households currently fitting the bill.

We’ve expanded our coverage for the monthly rent report to 250 cities – specifically the ones that have populations over 100K and a rental stock of at least 2,800 apartments in 50+ unit buildings.

Curious about cities like Raleigh, Cincinnati, or Phoenix? See where your city stands when it comes to rent growth and average rent prices by checking out this table:

RentCafe is a nationwide apartment search website that enables renters to easily find apartments and houses for rent throughout the United States.

To compile this report, RentCafe’s research team analyzed rent data across the 250 largest cities in the US. The report is exclusively based on apartment data related to buildings containing 50 or more units.

Rent data was provided by Yardi Matrix, an apartment market intelligence source and RentCafe’s sister company which researches and reports on all multifamily properties of 50+ units across 124 markets in the United States. Rental rate coverage is for Market Rate properties only. Fully Affordable properties are not included in the Yardi Matrix rental surveys and are not reported in rental rate averages.

Starting with the January rent survey, Yardi Matrix is using a methodology that incorporates more properties into the sample which caused slight changes in overall rents and year-over-year changes compared to the previous reports. We expect this methodology adjustment to produce more accurate averages at the national and metro levels.

*National averages include 124 markets across the US, as reported by Yardi Matrix.