- With apartment completions at a 10-year high, the national rent fell $3 from the previous month to $1,216 in October 2016
- On a year-over-year basis, the average apartment rent grew 4.4% nationwide
- 3 California cities lead the nation in annual rent growth: Stockton, Sacramento, and Long Beach
- Corpus Christi, TX and Tulsa, OK are the only 2 big cities where rents have decreased year-over-year
The US apartment sector continues its bull run with a record high number of completions, increasing rentership rates, and rising rental prices.
The average apartment rent has reached $1,216 in October, a $3 drop from September 2016 – yet on an annual basis, the rent growth marathon continues with a robust 4.4% increase across the country, as shown by recent data from Yardi Matrix.
The 4 major property types all saw slight price drops in October. Studio and 1-bedroom apartment rents decreased by 0.1% from September to October, and 2-beds and 3-beds each saw price cuts of about 0.3%. Meanwhile, on a year-over-year basis, all property types experienced considerable price gains, approx. 4.4% – 4.6%.
Studios now rent for an average of $1,064, 1-bedrooms command $1,095 on avg., 2-bedrooms average at $1,290, and three-bedrooms go for $1,506 /mo.
Now’s the Best Time to Rent
Apart from the huge apartment supply entering the market, the current slowdown in rents may also be attributed to seasonal factors, as demand generally lessens during the cold season, putting a drag on rent growth as well. Budget-conscious renters have a 3-month loop every year, from October to December, when rents decelerate significantly – this is the best time to move if you’re looking to get a better deal on rent. Based on previous rent growth cycles, prices begin to rise again in February and reach their highest points in August.
Luxury Market Hotter than Ever: The Number of Wealthy Renters Tripled in the Last Decade
A lot has changed in the aftermath of the Great Recession, including people’s attitudes towards housing; it’s less about becoming a homeowner at all costs and more about achieving financial independence, with renting providing a more flexible housing option in the current economic context. The two major demographic cohorts that are driving today’s housing market – millennials and baby boomers – tend to favor renting over buying. It’s one way to avoid property taxes and upkeep, all while getting access to enhanced living environments, high-end amenities, and premier locations.
Moreover, the changing dynamics of the housing sector has created a market for luxury housing and it surely isn’t lacking in demand. Renting has become the hip thing to do, even at the highest income levels. In fact, the number of renter households who earn more than $150,000/year more than tripled over the last decade, jumping from 551K in 2005 to over 1.75M in 2015, according to the latest Census data. And rental prices followed suit, naturally, as real estate is a game of supply and demand. The average rent for a high-end apartment is now $1,408, up 3.9% y-o-y.
Top 3 Most Expensive Rentals in the U.S. in October
Monthly Rent: $500,000
Address: 795 Fifth Avenue, 39 floor, New York, NY 10065
Photo credit: Point2 Homes
Monthly Rent: $375,000
Address: 9505 Lania Lane, Los Angeles, CA 90210
Photo credit: The Agency
Monthly Rent: $300,000
Address: 795 Fifth Avenue, Unit 393, New York, NY 10065
Photo credit: Point2 Homes
West Coast Leads the Nation in Price Increases, Oakland, Sacramento Follow in San Francisco’s Footsteps
Here’s some good news for renters: the recent uptick in apartment construction, currently at a 10-year high, has not only revived dormant neighborhoods across the country but also prompted price drops in some historically tight markets. San Francisco – which baffled renters with incessant rent hikes in the last couple of years – is finally pulling the brakes on rent growth. Rents in the City by the Bay – now pegged at $3,399 – declined 0.5% since last month, and increased only 0.8% from the same period last year. The huge apartment supply coming online has also helped Manhattan’s overheated market to cool down. Rents in Manhattan have fallen 0.2% month-over-month to reach $4,165 in October. Rents in Washington, DC are also down 0.1% from September, and they even edged lower in Boston (-0.8%).
But, while San Francisco’s and other high-flying cities’ rental markets have indeed softened, smaller cities where supply is not catching up with demand are becoming increasingly more expensive. Oakland, CA for one, which is trying to accommodate the influx of residents moving into the area, has experienced an 8% growth year-over-year, with rents reaching an astounding $2,455 in October. In fact, 8 of the 20 cities with the fastest growing rents are in California – the favorite relocation destination of millennial renters who are following the jobs trail.
Sacramento has experienced the second-highest jump in rents year-over-year in October (12.9%), topped only by Stockton, CA where rents climbed an impressive 13.2%. Sacramento is a city on the rise, both literally and figuratively, with a growing number of residents and businesses setting up shop in California’s capital. But on the residential front, the city is lagging behind. A meager 730 units are projected to be delivered this year to Sacramento’s hungry rental market, a 30% decrease compared to 2015 when ~1,000 units came online. Los Angeles, on the other hand, where intense apartment construction will bring more than 20,000 new units to the market, is taking a break from staggering rent growth. Rents in L.A. have only risen 0.6% month-over-month, and are now resting at $2,151.
Another western market that has attracted a great deal of investment, Arizona’s city of Mesa (Phoenix Metro) entices residents with live-work-play amenities with an added bonus of walkable neighborhoods and easy commutes to Phoenix’ dynamic employment centers. But with growing popularity comes rent growth. The average rent for Mesa apartments is now $861, a 9.7% increase from the same period in 2015.
Rents Losing Steam in Construction-Crazed Cities, including Boston, Houston, and San Jose
On the other end of the spectrum Tulsa, OK and Corpus Christi, TX keep rent growth at bay. Of the 75 biggest cities in the U.S., these two are showing consistent rent decreases. In October, rents dropped 0.6% in Tulsa and 0.9% in Corpus Christi from the same period last year.
What’s even more surprising, and the good kind of surprise for a change, is that the rental market is also slowing down in in-demand cities such as Boston, Houston and San Jose, mainly supported by the flood of new supply. Approx. 26,000 new apartments are expected to be completed this year in Greater Houston, the #1 metro for large-scale apartment construction in the US. Boston will add approx. 7,500 new units in 2016, and San Jose will boost its rental stock by nearly 6,000 new apartments.
Arlington, Plano, Fort Worth Outpace Dallas in Rent Increases
Texans love to say everything is bigger in their Lone Star state. Well, it’s a good thing that rents are an exception. Compared to other big employment hubs on the west and east coasts, rents are actually smaller in Texas, even in job-oriented cities such as Dallas, Austin, and Houston. Moreover, even as more and more people flock into the area, the wave of new construction taking over Texas’ major urban centers is keeping demand and supply in balance – hence the relatively affordable rental landscape.
The most expensive city in Texas is Austin, where rents climbed 4.2% y-o-y to reach $1,310 in October, followed by Plano with an average rent of $1,264. Plano’s 7.4% growth rate is only topped by Arlington’s where rents rose 8.2% from the same time last year.
Fort Worth’s 6.6% increase in rents comes as no surprise as the city continues to attract both luxury developments and wealthy renters. According to our most recent report on the changing dynamics of the housing market, Fort Worth leads the nation with a spectacular 77% increase in the number of high-income renters from 2014 to 2015.
Top U.S. Cities with the Highest and Lowest Rental Prices
The U.S. apartment market is finally cooling down, just not as much as needed to actually offer renters in tight markets some real respite from the increasing rent burdens. Nationwide, the number of cost-burdened renters rose from 14.8 million in 2001 to 21.3 million in 2014, with 11.4 million of these households paying more than half their incomes for housing.
The most expensive housing market in the US by far is Manhattan, where average rents hit an eye-popping $4,165 in October. San Francisco is not far behind, with rents clocking in at $3,399. Boston apartments command a shocking $3,201/mo., making The Hub the third priciest city for renters.
Compared to NYC’s or San Francisco’s brutal rental markets, Wichita, KS and Toledo, OH come as a breath of fresh air. The average rent in Wichita is $628, while rents in Toledo sit somewhere around $660/mo., making them the two cheapest big cities for renters in the U.S.
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||Long Beach, CA||$1,830||1.0%||9.7%|
|5||Colorado Springs, CO||$1,006||1.3%||9.3%|
|13||Las Vegas, NV||$899||0.4%||7.2%|
|16||Chula Vista, CA||$1,565||0.4%||6.8%|
|18||Fort Worth, TX||$995||0.8%||6.6%|
|19||Los Angeles, CA||$2,151||0.6%||6.6%|
|22||Kansas City, MO||$909||0.4%||6.2%|
|25||Santa Ana, CA||$1,759||0.6%||6.0%|
|34||San Diego, CA||$1,959||0.2%||4.9%|
|37||St. Paul, MN||$1,133||0.8%||4.5%|
|43||Virginia Beach, VA||$1,125||-0.1%||3.9%|
|50||San Antonio, TX||$973||0.2%||3.2%|
|52||St. Louis, MO||$864||-0.2%||3.0%|
|62||New Orleans, LA||$1,083||-0.9%||2.3%|
|64||Jersey City, NJ||$2,777||0.0%||1.3%|
|67||San Francisco, CA||$3,399||-0.5%||0.8%|
|68||San Jose, CA||$2,557||-0.9%||0.8%|
|69||El Paso, TX||$756||0.3%||0.7%|
|70||Oklahoma City, OK||$731||-0.3%||0.4%|
|72||Corpus Christi, TX||$965||0.2%||-0.9%|
|73||New York City (Brooklyn), NY||$2,790||1.0%||-|
|75||New York City (Manhattan), NY||$4,165||-0.2%||-|
Change in Nominal Wage vs Average Rent
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 123 markets in the United States.
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 123 markets across the US, not just the 75 cities featured in the report.