Rent prices are typically at their highest in the spring and summer months. Once the temperatures begin to rise and the weather becomes more pleasant, more and more people start to search for new places to live. Over the past six months, the threat of a recession and the increasing interest rates have caused demand for rental units and homes to remain flat or drop in many locations across the U.S.
However, there are some states that have received a large sum of new residents in a short period of time, which has resulted in rent prices growing considerably in these locations. People are choosing to move to locations that have robust economies as well as reasonable rental prices. The areas that have garnered the highest rent increases are ones where the average rent price is still at a somewhat low level when compared to the national average.
Before delving deeper into the states and cities that are experiencing the highest increases in rents, you should know that rents increased nationwide by 0.6% from March to April. The year-over-year increase was 5.3%, which is buoyed by
At the moment, nationwide rents have a median price of just under $2,000. In some Midwestern and Southern states, rents have been increasing at double-digit rates. Below is a comprehensive guide on where rents are increasing rapidly and why these areas are reacting differently than most other markets across the U.S.
There are many markets where rents have been increasing by a considerable amount in recent months. A large percentage of these markets have relatively low property prices, which makes them ideal for investors who believe that rental rates will continue to spike in the coming year. All the markets listed below are ones that we're familiar with.
One market that's experienced rapid growth as of late is San Antonio, Texas. While Austin has gone through its own growth over the past five years, both San Antonio and Fort Worth are benefiting from high population increases and a strong economy. The year-over-year growth in rents throughout San Antonio is seen with every type of apartment unit.
For instance, rent prices for studio apartments have risen by 2% over the past year and are now situated at $975 on average. One-bedroom apartments are currently priced at $1.080, which is a 5% year-over-year increase. The largest increase has occurred with two-bedroom apartments. At the moment, the median rent price for a two-bedroom apartment is around $1,380, which is an 8% increase from last year. The combination of moderate rent prices, a strong economy, and a big city feel to the area makes San Antonio a highly appealing destination to new renters.
Milton is a relatively small city in Florida that many potential tenants are interested in because of its comfortable weather and relaxing environment. The price for a two-bedroom home in Milton is around $1,100, which represents a 22% year-over-year increase. With a convenient location in the Pensacola metropolitan area, Milton should continue to be popular among people who are looking for a place to live.
One reason why rent prices have gone up in recent months is because of the increase in home values during the same 12-month period. The median sale price for a home in Milton is around $293,000, which is a 5% year-over-year increase. While owning a home is too expensive for many, apartment living is still relatively affordable even with a 22% increase.
Poinciana is a peaceful settlement that's located just 14 miles from Haines City. Even though this destination isn't experiencing high population growth, it's appealing among Florida residents who are looking for a comfortable place to live that's not near a large city center.
Rents for one-bedroom and two-bedroom apartments are high at $950 and $1,650 respectively. However, the rents for one-bedroom apartments have increased rapidly in recent times. Over the past month, the average rent price for a one-bedroom apartment rose by 12%.
Akron is one of the best cities to invest in. As the fifth-largest city in Ohio, it has a strong economy that's supported by the manufacturing, biomedical research, education, and healthcare industries. Around 50% of people who live in Akron rent apartment units, which means that real estate investors should have access to many investment opportunities. Rents have increased the most in studio and one-bedroom apartments. Over the past year, the average rent in a one-bedroom apartment has risen by around 4%. In comparison, prices for studio apartments have increased by more than 9%.
Cleveland is another popular market in Ohio that's experiencing some high rent increases with one-bedroom and two-bedroom apartments. While Cleveland is a large city with a population of more than 360,000, rents for one-bedroom and two-bedroom apartments are well below the national average, which means that there's ample room for future growth. Over the past month, the rental rate for a one-bedroom apartment increased by upwards of 5% to $1,197. Two-bedroom apartment rates have risen by 11% in the same time period.
Since 2000, the Kansas City population has grown by nearly 15% and is now over 500,000. Much of this growth has taken place since the beginning of the COVID-19 pandemic, which has resulted in rental rates increasing rapidly in this market.
If you're looking to invest in Kansas City real estate, keep in mind that rental rates are increasing for all apartment unit sizes. Over the past month, rental prices for a studio apartment have increased by around 1% for a price of $895. However, the average rent price for a one-bedroom apartment has risen by 12% to more than $1,100. During the same stretch of time, rents for two-bedroom apartments increased by 8% to just under $1,400.
While Indianapolis is the most populous city in Indiana, it's another Midwestern location that had low rent prices for many years. However, that has recently changed. When comparing year-over-year rents, every apartment unit size experienced double-digit growth.
Rents for studio apartments increased by 13% year-over-year and are now at $1,187. In comparison, rents for one-bedroom apartments have risen by 10% and are at $1,175. As for two-bedroom apartments, rental prices rose by 11% in the same period and are situated at $1,342. Regardless of the type of apartment you'd like to invest in, the multifamily market in Indianapolis is strong.
In the U.S., the national median rent is around $1,967, which is just a small increase from the previous year. In fact, rents have stagnated and flattened throughout many areas across the U.S. However, that's not true for every location. As displayed above, the markets we invest in have experienced rapid rent increases in recent months, which provides investors with the opportunity to get into markets that aren't moving like the rest of the country. At times when the housing market is fluctuating, you need to seek out opportunities in areas with high potential.
While rent prices typically increase at this time of the year, rents have remained relatively consistent in most locations because of new inventory being introduced to the market alongside a drop in overall demand. However, the markets mentioned above have benefited because their average rents are all well below the median rent nationwide. For instance, the average price for a one-bedroom apartment in San Antonio is just $1,080. It's clear that people are looking for markets where they're confident they can find a well-paying job and easily pay their monthly rent at the same time.
When you're looking to invest in rental real estate, location is an essential consideration. A well-maintained property isn't worth much if it's purchased in an area where rents have remained flat or slightly declined. At the same time, finding an affordable property in an area where rents are starting to increase rapidly gives you an opportunity to gain high returns in a short period of time. Because of the state of the rental market, performing due diligence is necessary to make a wise investment decision.
There are numerous factors that indicate that rates in certain locations will continue to rise in the months to come. The main factor is inflation. While inflation has slowed over the past six months, it's still at nearly 5%. When prices are high, it's more difficult to purchase groceries, gas, building supplies, and clothing. In this scenario, rental prices increase as well.
The only reason that prices are stagnating in some cities is because of the already high prices that potential tenants experience. In comparison, the cities in this guide currently have affordable rents despite. You should also consider the cost of owning a home. In many markets across the country, home values have been steadily rising over the past year. While some markets have seen small decreases in home values, borrowers are still expected to pay high interest rates, which means that many potential buyers are priced out of making an offer on a home.
When prospective homeowners are unable to make a purchase, they fall back to apartment living. Certain Midwestern and Southern states have larger cities where renting has remained affordable despite the pandemic. If people are capable of moving to a new state, cities with affordable rents are highly appealing. Many individuals no longer have an appetite for mortgages that come with high interest rates and unfavorable terms.
Another reason why rents are increasing rapidly is because of a shortage of construction. In the U.S., around 300,000 new homes need to be built every year to replace the existing stock and make sure that demand is satisfied.
As for apartment buildings, there's a 600,000 deficit that occurred as a result of slowed construction following the 2008 financial crisis. With less inventory to select from, there isn't much that will drive prices down. Even though material shortages aren't as severe as they were in 2021 and 2022, developers simply don't have enough time or labor to construct the number of homes and multifamily units that are needed to meet demand.
While there are some indications that inflation is easing and interest rates will begin to drop by the end of 2023, nothing's certain. However, you can be confident that the markets mentioned above are highly popular among tenants who are searching for an affordable place to live. With the right approach and enough research, you can invest in rental properties that will pay dividends and help you grow your portfolio.