Catching up on rents across the U.S. (and Canada)

Back in February we shared this post, If you are a relocating employee...rent or buy? At that point, predictions were that rents would be expected to grow more than home prices, but that mortgage rates would still make buying more challenging for renters to switch over. This CNN article explained that while renting in 45 of the 50 largest cities in the US was cheaper (back in February), there are 5 where that was not true: Memphis, Pittsburgh, Birmingham, St. Louis, and Baltimore. So where are rents going as we head into the second half of 2023? 

This Rent.com July 2023 Rent Report shares that rents picked up in June after a notable May drop, and May 2023 was the first price decline in more than three years! National rent average peaked in August 2022 at $2,053, and June is slightly under that at $2,029. The Midwest and South continue to dominate the list of largest state-level gains. Of the 10 states that experienced the highest rent growth, eight are from these two regions. South Dakota and Mississippi each grew by more than 26 percent year over year. Among the 50 most populous metropolitan areas, California dominated the list of largest gains in June. Overall declines in the West were led by Washington (which had the largest yearly decrease), Idaho, Arizona, and Nevada, four of five states to experience the largest rent declines in June. Rents in Texas and Oklahoma declined by roughly 4 and 2.50 percent, respectively. In Maryland, the only other Southern state among the 10 largest losers, rents declined by nearly 3 percent. 

In total, 14 states saw yearly rent declines in June.

Here are a few additional interesting rental trends:

1. Built to rent homes are on the rise: This is a new type of construction that offers the opportunity to reside in a new home with property management perks and amenities without requiring a down payment or a long-term commitment. It is something that seems to be focused on the Phoenix metro area right now. According to Axios Phoenix, the rent for these homes is typically $1,500 less per month than the average monthly mortgage payment for a single-family home.
2. HOAs can no longer ban Section 8 households in Texas: This law came about after an HOA in North Texas prevented landlords from renting their properties to Section 8 tenants. Dallas has a shortage of 33,660 affordable rental units for households earning 50 percent or less of the area’s median income, and this law is seen as a big win for housing advocates in the area. The law will take effect on September 1, 2023. Will this be a trendsetter for other locations?
3. Overall, it’s still less expensive to rent than to buy: Per NerdWallet, despite rents continuing to soar, the typical rent for an average three-bedroom house is still more affordable than owning a similar-sized home. This holds true for 95% of the 222 U.S. counties analyzed by ATTOM, a land and property real estate data curator, in their 2023 Rental Affordability Report.
4. Gen Z has the largest percentage of renters: Per RentCafe, 74% of the the Gen Z cohort are renting their homes, according to a March 29 data analysis by RentCafe, an apartment listing service. 
5. A record number of renters are cost burdened: According to The State of the Nations Housing 2023 published by Harvard's Joint Center for Housing Studies, 21.6 million households now spend more than 30% of pre-tax income on rent. Some households are even paying even up to 50% of earnings on apartments, per Harvard’s research. Housing experts often suggest tenants spend less than 30% of their income on rent.
6. Certain locations are at record high rents: There are some regional disparities when it comes to rent trends, but overall there is an ongoing affordability issue. Certain cities are experiencing historic highs in rent with no sign of slowing down. This data from Norada Real Estate shows that cities like New York and Jersey City are facing unprecedented rent levels. The median rent for a one-bedroom apartment in New York City has surged to an astounding $3,980, with the median two-bedroom rent reaching $4,470. San Diego's one-bedroom median of $2,440 is now just $40 above Los Angeles. San Francisco and Miami also remain very high. As of June 2023, the median cost of a one-bedroom apartment in San Francisco, CA, is $3,000 and for Miami, the cost of renting a one-bedroom apartment in Miami, FL, is $2,850.

If you're looking for more thoughts on the rental market, also look at this latest info from Zumper:

BONUS SECTION: Looking for some insights on Canada? My friend Michael Deane from All Points shared this via LinkedIn last week. He explains that rental prices have been through the roof across Canada and that the average rent last month was $2,005. This is an increase of 12% compared to December 2021. All Points shares that it now costs almost $1,300 to live in a property with a roommate in Toronto as rent prices skyrocket. Michael noted that although Toronto and Vancouver have consistently been in the spotlight since last year, other regions are also seeing their rent prices skyrocket - especially Halifax. Lastly, his post shares this article from CBC: Why rent is so expensive in 3 Canadian cities (that aren't Toronto or Vancouver). For even more info on the Canadian rental market, try this: National Rent Report August 2023: Record Rates; Average Roommate Rental Tops $1000 in Ontario