- The average US apartment rent decreased for the 4th consecutive month, reaching $1,210 in December
- On a year-over-year basis, rental prices gained 4% nationwide, according to research firm Yardi Matrix
- The West Coast leads the country in annual increases with Sacramento and Stockton at the forefront
- Tulsa, OK sees the biggest annual price drop, with rents in the city now nearly half of the national average
After a 9-month growing streak, rents began to cool off in September, with December cementing the idea that the rental market is indeed softening. The intensified construction activity that saw new apartment inventory levels grow by 50% in 2016 compared to 2015 (320,000 vs. 200,000 new units) had a huge say in the evolution of rental prices this past year.
The average US apartment rent dropped by $4 in December to $1,210, according to data from Yardi Matrix which tracks rent data across 124 markets across the US (approx. 14.7M units and >78,000 properties).
Prices dipped across all major property types in December compared to the previous month, with one-bedroom apartments seeing the biggest decrease, -0.4%. Studios now rent for $1,059, 1-bedrooms go for $1,089, 2-beds average $1,284 and three-bedrooms call for $1,495/mo.
On an annual basis, however, rents are still on an upward climb, settling at 4% in December, well above the long-term (8-year) 2.3% average.
|Bedroom Type||Average Rent||Change M-o-M||Change Y-o-Y|
High-End Apartment Glut Hits Luxury Market Prices: Rents in Upscale Properties Down 0.3% in December
Still fighting off the ghosts of a bitter recession, many people turned away from homeownership and see renting as a viable, more flexible housing alternative. Enticed by shorter commutes, amenity-rich environments, and low-maintenance, mortgage-free housing, even those who can afford to buy homes are choosing to rent, Millennials and Baby Boomers included. In fact, the number of renter households that earn more than $150,000/year, the highest income bracket as per U.S. Census Bureau data, has exploded over the last decade. Totaling approx. 551K in 2005, the number of wealthy renters had grown to 1.75M in 2015, widening the ranks of the high-income renter cohort by an impressive 1.2M.
Naturally, this demand for luxury apartments has not been left unattended. Most of the cranes dotting the skylines of our major urban hubs are working to build luxury apartments. In 2015, 3 out of 4 new apartments were high-end (or 75% of all large-scale rental developments). 2016 construction followed on the same path, with 80% of new apartment buildings completed in 2016 categorized as luxury.
These properties come with some exquisite amenities. Think 24/7 health and fitness centers, yoga rooms, concierge services, rooftop farms, and infinity pools. And believe it or not, shrinking prices. The huge number of high-end units entering the market means there’s competition among properties and offerings which helps keep rents somewhat stable.
The average rent for luxury apartments has been on a very gradual downward slope for the last 4 months, reaching $1,397 in December.
Following Record-High Apartment Construction, Rents are Cooling Off in SF, San Jose, Boston
Perhaps the fact that the pace of rent growth is slow in markets where demand and supply are in relative equilibrium such as Tulsa, Corpus Christi, and El Paso is not that surprising. But the good news comes from high-flying cities for a change. Renters in historically tight markets such as NYC, San Francisco, San Jose, and Boston are finally seeing some respite from the continuous rent hikes that plundered their pockets in recent years.
Rents in SF – where new unit completions are at a 10-year high with approx. 3,200 apartments coming online in 2016 – have decreased 0.9% year-over-year and only increased 0.3% from last month. Doesn’t seem that much? Well, in December 2015, rents in the City by the Bay were showing a 9% increase y-o-y; in 2014, things were even worse with a staggering 13% y-o-y growth in city rents. In other words, renters are now paying $147 more on rent than they did in 2015 which seems almost reasonable considering that the previous growth cycles translated into double that amount. Renters were shelling out $278 more in rent on average in 2015 than in 2014, and $351 more in 2014 compared to the previous year.
Similarly, rents are flatlining in San Jose, where supply is finally catching up with demand. The rental market is also softening in NYC, with the two most popular boroughs – Manhattan and Brooklyn – experiencing rent deceleration. Rent growth stands at 0.6% in Brooklyn month-over-month while apartments in Manhattan command $4,144/mo., $2 less than the November figure. On an annual basis, rents in Manhattan have only increased 0.4%, making it the market with the 6th slowest growing rental prices.
Detroit, Nashville, Fort Worth Join Usual West Coast Culprits in Staggering Y-O-Y Rent Growth
While rent growth is occurring at a slower pace nationally, not all cities are created equal. If concessions such as a month of free rent, free gym access, and waived move-in fees are becoming the new norm in construction-crazed markets such as Houston, Boston and Manhattan, that’s certainly not the case for Sacramento renters where limited inventory levels keep rents spiraling.
Detroit rents are also rising at a rapid pace, a sign that the city has recovered some of its appeal and economic strength, though in terms of new apartment options, it is still lagging behind. A meager 200 units have been completed in Detroit in 2016, one of the factors contributing to the huge 9.3% rent growth y-o-y. Detroit apartments now command $932/mo. on average.
What’s the Biggest Surprise in Arizona’s Rental Market Now? Surprise Has Fastest Growing Rents in State, Posts Double Digit Growth in December!
The sound employment picture, growing population, and robust demand for apartments are driving Arizona rents to record levels. Among the biggest cities in the state, Surprise takes the lead with a 12.6% rent growth year-over-year, followed by Mesa (9.1%) and Glendale (8.8%). Phoenix comes in 5th with a 7.1% annual increase, according to research firm Yardi Matrix.
Phoenix apartments now rent for $889/mo., $59 more than in December 2015, with rents kept in check by the high number of completions. Approx. 2,900 new units were delivered in 2016, with more than 3,500 apartments in the pipeline. But the same doesn’t hold true for cities such as Surprise and Gilbert where available inventory is scarce. Renters in Surprise, where new large-scale development is practically nonexistent, are now shelling out $1,025/mo. on average, $115 more than the same period last year.
The priciest Arizona city for renters is Scottsdale where rents hit $1,254 in December.
From an investment standpoint, the Phoenix metro area is expected to maintain its status as a top performing market. “Phoenix has been at such a restricted level of multifamily housing over the last 10 years that saturation is not an issue”, said Yardi Matrix senior analyst Doug Ressler. “Market fundamentals will remain strong in 2017 as the area continues to attract top employers, particularly in the tech sector.”
“Pension funds and life insurance companies, and even individual investors, are buying multi-family product because apartments are a safe investment”, he added.
Phoenix has seen tremendous efforts meant to rebuild its urban core which are starting to pay off. SkySong, the 42-acre ASU Scottsdale Innovation Center, is projected to generate more than $32 billion in economic output and more than 10,000 new jobs across the Valley of the Sun over the next 30 years, according to new analysis performed by the Greater Phoenix Economic Council. State Farm, another major player in the area, plans to boost employment numbers by 1,000 new hires at its Marina Heights regional headquarters in Tempe. Marina Heights, which cost more than $700 million to develop, may eventually house up to 8,000 employees.
Top 3 Most Expensive Rentals in Arizona in December
Monthly Rent: $40,000
Address: 7017 N Invergordon Road, Paradise Valley, Maricopa County, AZ 85253
Photo credit: Point2 Homes
Monthly Rent: $36,000
Address: 20011 W Minnezona Avenue, Glendale, Maricopa County, AZ 85340
Photo credit: Point2 Homes
Monthly Rent: $35,000
Address: 5761 N Casa Blanca Drive, Paradise Valley, Maricopa County, AZ 85253
Photo credit: Realty Executives Phoenix
Top U.S. Cities with the Highest and Lowest Rental Prices
Apartment construction may indeed be taming rents across the board, but affordability still eludes many of our nation’s renters. Our most recent research of U.S. Census Bureau and Yardi Matrix data revealed that more than two thirds of the 100 biggest US cities are moderately rent-burdened, meaning that rent takes up between 30 and 49.9% of the median income.
And while it’s true that Manhattan may have something to be joyous about as rent growth is softening, the borough still remains the #1 most expensive place to live in the US with an eye-popping $4,144 in average rent. The second and third least affordable rental markets are San Francisco and Boston, where rents hover around $3,360 and $3,172 respectively.
At the other end of the spectrum, Wichita ends the year as the cheapest big city for renters in the U.S. with apartments commanding $631 on avg.
See where your city stands when it comes to rent growth and average rent prices by checking out this table:
|Rank||City||Average Rent||Change M-o-M||Change Y-o-Y|
|3||Colorado Springs, CO||$1,020||0.1%||10.0%|
|6||Long Beach, CA||$1,828||0.2%||9.0%|
|12||Las Vegas, NV||$905||0.3%||6.7%|
|19||Fort Worth, TX||$996||-0.5%||5.7%|
|20||Los Angeles, CA||$2,169||0.5%||5.7%|
|25||Chula Vista, CA||$1,555||0.1%||5.3%|
|30||Kansas City, MO||$906||-0.7%||4.9%|
|36||St. Paul, MN||$1,141||0.5%||4.5%|
|37||Santa Ana, CA||$1,748||-0.3%||4.4%|
|45||New Orleans, LA||$1,093||-0.2%||3.7%|
|46||Virginia Beach, VA||$1,126||-0.9%||3.4%|
|48||San Antonio, TX||$976||0.5%||3.4%|
|50||San Diego, CA||$1,932||-0.5%||3.2%|
|60||St. Louis, MO||$860||0.5%||2.3%|
|62||Jersey City, NJ||$2,754||0.0%||1.9%|
|64||Oklahoma City, OK||$737||1.2%||1.1%|
|67||El Paso, TX||$752||0.7%||0.4%|
|68||New York City (Manhattan), NY||$4,144||0.0%||0.4%|
|70||San Jose, CA||$2,549||0.0%||0.0%|
|71||Corpus Christi, TX||$965||0.5%||-0.7%|
|72||San Francisco, CA||$3,360||0.3%||-0.9%|
|75||New York City (Brooklyn), NY||$2,819||0.6%||-|
About RENTCafe and How We Compiled the Data
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 75 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.
Based on Yardi Matrix’s definition and classification of the apartment market by rental household segments, high-end or luxury rental properties are those that fall into the discretionary (Class A+/A) and high mid-range (Class A-/B+) class categories.
*National averages include 124 markets across the US, not just the 75 cities featured in the report.