Last year was one of the most dynamic years in real estate, especially on the rental market front. As we prepare our 2019 forecasts, let’s look at some of last year’s rental highlights discussed in our report written at the end of last year. Taking into consideration 130 markets across the United States, the report was based on data regarding buildings containing 50 or more units across the country’s 252 largest cities.
The study is based on Yardi Matrix data, covering every multifamily asset within a market coverage areas that includes around 90,000 properties. According to Yardi Matrix, a RENTCafé sister company, the average U.S. apartment rent was $1,419 by the end of the year. The study also revealed that rent prices experienced a year-over-year increase of 3.1%, which translates into $42 more than what renters were paying for apartments for rent during the same period in 2017. With this in mind, let’s have a look at the 2018 highlights of the rental market.
Small Cities, Biggest Changes
Smaller markets are usually where the biggest rent changes take place. According to its methodology, the study includes cities with populations over 100,000 and a rental stock of at least 2,900 apartments. Last year, rent prices increased across the U.S., but small cities with a population of less than 300,000 saw the most significant y-o-y changes.
According to the report, Odessa, TX, and Midland, TX, rose to the top twice as fast as any other city in the country. Odessa tops the list of fastest increases in small cities with 21.8%, while rents in Midland are right up there with a 21.4% increase. Reno apartments saw a 10.2% average y-o-y increase in rent prices, followed by Peoria, AZ, and Manchester, NH, both sharing a spot at 9.7%. On the other hand, there were small cities like Baton Rouge, LA (-2.4%) and College Station, TX (-1.1%) where rents slowed down to a significant degree.
Mid-Size City Rent Increase Falls Somewhere in the Middle
In mid-sized markets like Tulsa, OK and Lexington, KY, rents remained relatively unchanged throughout the year, while in cities like Corpus Christi, TX, and Wichita, KS, rents increased by 1.4%. However, California dominates the list of fastest growing rents in mid-sized cities, defined here as cities with a population between 300,000 and 600,000.
Fresno apartments saw a 5.7% rent increase, quickly followed by Riverside apartments with 5.6% — similar to changes in the price of apartments in Pittsburgh, PA and Long Beach with 5.5%. However, the biggest surprise comes from Mesa, AZ, where the monthly rents at the year-end show an 8.3% growth rate. This percentage is what places the Phoenix suburb in the top 10 nationwide.
Several Large Cities Meet Affordability Demand
Rent prices in cities with a population of 600,000 or more have been significantly influenced by the need for more affordable accommodation. Such is the case of Las Vegas, Phoenix or Los Angeles, where increasing demand showed its persistent effects at the end of 2018. In terms of rent fluctuations, Las Vegas, NV, seized the top position with what the report calls “aggressive increases” which lasted throughout 2018.
At the end of the year, the almost 8% growth rate in Sin City outpaced larger renter hubs nationwide with the average rent reaching $1,044. Phoenix’s 7.7% increase meant $1,011 in average monthly rent, followed by Los Angeles, CA, in third place, where apartments now rent for 6.6% more.
In LA’s case, the $153 increase is second only to Manhattan, NY, where a more modest 3.9% increase accounts for the extra $157 added to your not-so-modest monthly average of $4,200. And since we’re talking about the Big Apple, Queens is the only large market where rents have stagnated, maintaining an average of $2,196 after a -0.2% year-over-year change.
Most Searched Terms Reflect the Same Cost-Conscious Demand
Internet searches speak for what renters are looking for and, in 2018, what they wanted were cheap apartments and studios. In compiling this analysis, search core terms and phrases were ranked based on the average monthly volume, then grouped based on user intent.
Rental-related queries that included “cheap apartments” accounted for more than a quarter of Google searches. Online apartment searches that included “studio” were next, at almost 24%, and a third of the keywords used while searching online was made up of “near me” queries in various combinations, depending on user’s preference and location. The number of rooms plays an important factor in Google searches. Accounting for 10.48% of queries in 2018, one-bedroom apartments are the top preference among potential renters, followed by two-bedroom searches at 9.46%.
These findings further reinforce the growing preference toward renting among the population. 2018 offered plenty of factors in favor of renting, with positive demographic trends and rising interest rates painting a similar picture for 2019 already.