Apartment Rents Still on a Roll in Most Cities Though Some Hot Markets See Important Declines in March

Key takeaways:

• The average U.S. apartment rent increased by $6 in March, reaching $1,312 according to Yardi Matrix.
• Again the California cities make up the bulk of the rent-growth list, with twelve of the top 20 cities located within the state’s borders. This time Lancaster and Stockton took the No. 1 and No. 2 spots.
• New York has the nation’s highest rents, and San Francisco, with the second highest rent, saw the biggest y-o-y rent drop in the nation for March, decreasing 4.3% over the year.
• 210 cities out of the 250 we surveyed saw annual rent growth last month – meaning 84% of the country’s largest cities. Rents decreased in 12 cities, and flat-lined in 28 cities.

Coming in with an average apartment rent of $1,312, March has signaled that the U.S. rental market may be cooling down, at least when looking at rent changes at a national level. Though rents were technically up for the month, they jumped by only $6 – just 0.5% more than February and 2.7% over the year, according to data from Yardi Matrix. That’s the slowest annual rent growth rate seen in three straight years and just half the year-over-year growth seen last March, when rents grew 5.7% over the year.

What’s even more surprising, and the good kind of surprise for a change, is that rents are also easing in some of the country’s hottest rental markets, including San Francisco and Manhattan (where renters need an income of more than $150K per year to afford rent.) Both cities have seen year-over-year drops in average rents, with San Fran dipping by 4.3% and Manhattan declining by 2.2%. Overall, the signs are good for renters in San Francisco; this marks the third month in a row the city has seen rent declines. In January, the city saw a 0.9% dip in rents; in February, they dropped another 3.6%.

No Matter the Size, Rents are Stable

In keeping with national rent trends, every property type essentially flat-lined in March, with studio units seeing a 0.5% uptick and one-, two-, and three-bedroom properties up just 0.4%. Year-over-year, improvements were slightly better, with all unit types rising in the 3% to 4% range.

This is surprising given the deluge of one-bedroom units that were supposed to hit the market late last year. These property types have yet to see any significant change since 2017 began, coming in at an average of $1,188 per month in March. Studios were just slightly below that at $1,165 per month, while two- and three-bedrooms came in at $1,385 and $1,606, respectively.

U.S. Cities with the Biggest Rent Decreases: Bay Area Dips, Matches Pace with Texas, OK Towns

Before we dive into our city-specific research, it’s important that we call out a major change that we’ve made to our reporting structure. Though in previous reports, we’ve covered just 75 cities in our rent growth rankings, this month, we’ve expanded that 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.

While this doesn’t change what we report on or how we report it, it does add a few new names to the list – ones you might not be used to hearing in our regular posts. Pay close attention though; some of these new additions are making real movement on the rental scene.

Now, onto the results: for the second month in a row, San Francisco has recorded the largest year-over-year drop in rental costs. Dipping by 4.3% over the year, rents in SF averaged $3,330 for the month. And while the city does still have the second-priciest rent in the nation, it rivals many of the country’s smaller, more affordable towns in rent drops for a change. The City by the Bay tops the list of cities where rents are actually falling, followed by Odessa, Broken Arrow, Corpus Christi, and Oklahoma City.

But it’s not just San Francisco that Californians can get excited about. It appears the Bay Area in general is putting on the brakes on rent growth, too. Four other cities in the region – Fremont, Santa Clara, Oakland and Sunnyvale – all saw rents decrease over the year. Throw in the fact that potential rent control is in the works and only a mere 12 cities in the nation saw year-over-year decreases – just 5% of the 250 cities surveyed – and that’s certainly good news for the Golden State.

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

84% of U.S. Cities See Rents Rise; California Takes the Cake

I hope we didn’t get you Californians too excited just yet. While the Bay Area may be a shining light when it comes to rent growth, California still leads the way when compared to every other state in the nation.

In fact, a whopping 90% of California cities saw rents increase between March 2016 and March 2017. That’s 56 out of the total 62 California cities surveyed. So what were some of the top rent growers in the state? Those were Lancaster, which saw a 14.3% jump in rents; Stockton, which came in with a 12% rise; Modesto, 10.7 percent; Sacramento, 10.4%; Fontana, 9.3%; Victorville, 9.2%; Fairfield, 9.1%; Santa Rose, 9.1%; El Cajon, 8.7%; Escondido, 8.4%; Torrance, 7.7%; and San Bernardino, 7,7%. This marks the second month in a row Stockton has seen a 12% jump or more; in January, its annual rent growth jumped 10.9%. Sacramento saw 10.7 and 12.5% jumps, respectively.

But California towns weren’t the only ones to bear the brunt of rising rents. In total, a shocking 210 cities out of the 250 we surveyed saw annual rent growth last month – meaning 84% of the country’s largest cities. Non-California cities that made the top 20 list included Tacoma, Washington; Reno, Nevada; Colorado Springs, Colorado; Salem, Oregon; Salt Lake City and West Valley City, Utah; Buffalo, New York; and Kent, Washington.

The Cities with the Fastest Growing Rents – March 2017

“Rising rents in some of these seeming smaller towns might come as a surprise for many, but given recent rising interest rates and an ever-tightening housing supply, the barrier to homeownership is pretty high at the moment”, according to Yardi Matrix Senior Analyst Doug Ressler. “Many potential buyers are being forced into renting as a more affordable alternative – and it’s driving prices up in the process, even in some of the nation’s smaller, more seemingly affordable towns.”

Newbies Make Highest Rents Lists; Midwest, South Remain Most Affordable

As usual, the nation’s highest and lowest rents come as no surprise, with Manhattan, San Francisco and Boston taking the top three spots. Manhattan came in at No. 1 (though rents were down more than 2% annually) with an average rent of $4,094 per month. San Francisco came in at No. 2, and Boston at No. 3, with a rent of $3,174.

Thanks to our new survey size, our top 10 is full of new arrivals, including San Mateo at No. 4, with a Boston-rivaling rent of $3,002 per month, and Cambridge, Massachusetts. Rents in the Harvard home average $2,949 per month – more than twice the national average. (Apparently assumptions that the Boston rental market peaked are moot.)

Overall, it’s the Midwest and South that come in with the lowest rents; the list of top 10 most affordable rental markets includes cities in Kansas, Ohio, Oklahoma, Texas, Indiana, Missouri, and Tennessee. Wichita, Kansas, once again came in as the most affordable city in the nation, with a bargain-basement rent of just $632 per month. The rent in Wichita is up a few dollars since January and February, but it’s a mere fraction of March’s average rent – just 41% of the national average, in fact. Following close behind were Toledo, Ohio, at $668 per month; Tulsa, Oklahoma, at $669 per month; and little Killeen, Texas, at $696 per month.

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 Austin, Cincinnati, Phoenix, or Minneapolis? 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.