Cities experiencing rapid changes in rental prices: increases and decreases noted

Rents in major U.S. metropolitan areas changed significantly in April, according to a recent report from Redfin. Seattle and Sun Belt cities saw the largest rent declines due to an increase in housing supply, while the Midwest and Northeast saw sharp rent increases as demand remained high. Seattle’s average asking rent fell 7.3% year over year, the steepest decline among the 33 metros analyzed, due to a surge in apartment construction. Nine of the 10 metros with the biggest rent declines were in the Sun Belt, including Austin, Miami, San Diego and Phoenix, as housing supply soared to accommodate the influx of new residents during the pandemic homebuying boom.

In the Midwest, cities such as Minneapolis, Cincinnati, Chicago, Indianapolis and Detroit experienced the fastest annual rent growth due to their low rents, leading to high demand. Rents also rose significantly in the Northeast, including New York, Washington, DC and Boston, due to a decline in new housing construction. The average U.S. rent was $1,997 in April, up 3.6% from the previous year and 31.4% since the start of the pandemic, according to Zillow, which remains high amid historically low housing affordability. When it comes to the cost of renting a one-bedroom apartment in April, Midwestern cities like Minneapolis and Cincinnati were below the national median, while cities like San Francisco, New York and Boston were among the highest.

Due to its affordability, the Midwest has become a popular region attracting new residents, resulting in a 5.3% annual increase in average asking rent in March. Despite hitting a record, rents in the Midwest remained the lowest nationally. The North East also saw significant rent increases, with asking rents rising to the highest in the country. However, the number of new-build homes in the North East fell by as much as 44% year-on-year in April, while nationally it fell by 0.6%. On the other hand, the Sun Belt has seen a surge in new apartment construction to meet rising demand from newcomers during the pandemic, leading to falling rents as demand declined over time. Although rental growth has slowed since the pandemic peak, it continues to outpace wage increases, according to a recent report from StreetEasy.

Rents have risen 30.4% nationally since 2019, while wages have only increased 20.2%, underscoring the ongoing affordability problem for renters. The largest difference in rent growth compared to wage growth was seen in New York City, where rents rose significantly faster. In some markets, such as San Jose, Houston, Austin and Portland, wage growth outperformed rent growth last year, but the overall challenge for renters remains. Only six of the 50 largest U.S. metros have seen wages consistently exceed rents since before the pandemic, demonstrating the ongoing competition for renters across the country. The improved affordability for renters in certain cities due to falling rents in the Sun Belt areas could serve as a lesson for other U.S. cities struggling with housing affordability, according to Redfin Senior Economist Sheharyar Bokhari.