Despite a still-strong economy, one-bedroom U.S. average rent prices decreased by 2.01 percent, while two-bedroom prices were virtually flat, with a slight 0.08 percent gain.
2018 continued 2017’s trend of uncertainty, and as political controversies intensified, an unsettled feeling permeated the United States. Fires raged in California, Texans had to boil water for days because of floods, and the stock market began to look precarious.
Many readers probably do not remember the days of near-hyperinflation that plagued the U.S. during the 1970s, and they may wonder why some amount of inflation is desired. The Federal Reserve (a.k.a. the Fed) feels that a 2 percent inflation rate—in other words, a situation where yearly prices increase by 2 percent—is healthy. A higher inflation number can signal an overheating economy, and that can lead to higher apartment rental prices.
In order to keep the inflation rate manageable, the Fed uses interest rates as tools to kindle or fight inflation. During 2018, the Fed finally began to raise interest rates, and this has begun to affect the housing market.
Nationwide Median Rent
Nationally, one and two-bedroom 2018 rents were mixed over the year’s course. The national median rent for one-bedrooms fell 2.01 percent, ending the year at $1,025. Rents for two-bedroom apartments stood at $1,255 in December, only one dollar more than they were in January.
Rental rates that looked unexciting in January initiated a slow decline in February. By June, the decline became more pronounced as one-bedrooms fell by almost 4 percent to $1,005. Two-bedrooms also posted their peak weakness in June losing 2.71 percent at $1,220. By year-end, one-bedroom units settled at $1,025, off 2.01 percent for the year, while two-bedrooms flattened considerably with a statistically insignificant gain of 0.08.
Rent went up in 29 states last year, including the District of Columbia. It decreased in 22 states and stayed the same in just one: South Dakota.
The states where rent fell most were Wyoming, where rent fell an average of 3.53 percent, followed by West Virginia, with a loss of 3.51 percent.
The states with the highest average rental hikes were Nevada, where rents rose an average of 3.0 percent, and New Mexico, with a 1.94 percent rise.
The vast majority—45 states—saw their monthly average rent fluctuation stay within 2 percent of the previous year’s value.
The states with the highest rents were all on the coasts (or in the Pacific). Washington, D.C., again tops the nation, with an average rent of $2,358, followed by Massachusetts at $2,139, Rhode Island at $1,732, Hawaii at $1,676, and New York at $1,633.
If you’re looking for low rents, head for the Plains or the Southwest. With an average rent of $525 per month, South Dakota once again took the crown for the nation’s lowest rent. New Mexico ($576), Arkansas ($582), and Oklahoma ($613) weren’t far behind.
Aside from South Dakota, where monthly changes were flat, many of these states saw their rents decrease month to month, on average.
Monthly Rent Changes
Looking at statewide and national rental data gives us a good idea of what trends renters around the country are seeing. But if we take a closer look city-by-city and by apartment type, a more diverse set of trends emerge.
One tendency, however, remains the same: Rent increases outpace the decreases, but not by a great amount.
The 2018 yearly increase winner was Las Vegas, NV, with an average monthly increase of a healthy 4.9 percent followed by Dayton OH, at $733 and an average monthly rise of 4.77 percent. Milwaukee, WI was a 2018 hotspot, posting a 3.61 percent average increase, and Scottsdale, AZ reported 3.2 percent average rise.
Los Angeles, CA led the less impressive increase list with a reported 2.96 percent, and expensive San Francisco, with a whopping 2018 one-bedroom average rent of $3,535, rounded out the list at 1.36 percent.
Cleveland, OH was the biggest loser with a decline of 2.07 percent—with Santa Ana, CA not too far behind, falling 1.75 percent to $1,569. Fargo, ND lost just 1.67 percent in 2018, and Fort Lauderdale, FL declined by an even 1 percent.
Little Rock, AK won the prize for two-bedroom unit gainers with an eye-popping 7.28 percent average rise during 2018. Scottsdale, AZ and Las Vegas, NV were the two closest increasers at 5.55 percent and 4.57 percent, respectively. Dayton, OH rose by 3.38 percent, and Long Beach, CA gained a similar 3.31 percent to a pricey $2,123. Los Angeles, CA and Atlanta reported average monthly rent changes of 2.9 and 2.09 percent respectively, and Milwaukee, WI, Houston, TX, and Tampa, FL rounded out the top 10 greatest average monthly increasers with gains between 1.48 and 1.86 percent.
Significant two-bedroom average monthly decliners were led by Charleston, SC with a monthly average loss of 2.12 percent, followed by Jacksonville, FL with a 1.96 percent decline. Santa Ana, CA and Fargo, ND posted almost identical average monthly losses around 1.60 percent, and St. Louis held the number five spot with a fall of 1.5 percent per month on average. Minneapolis, MN, Richardson, TX, Seattle, WA, New Orleans, LA and Omaha, NE all reported very similar average monthly losses ranging from 1.25 to 1.47 percent.
Highest & Lowest Rents
Perennial winner of the most expensive place to live award San Francisco, CA held its coveted spot with an average monthly gain of 1.36 percent reflecting a crazy-high rent of $3,535. New York, NY was second, posting a modest 0.79 average monthly increase but a formidable $2,895 rent. Cambridge, MA was third at $2,614, and four California cities—Berkeley, Los Angeles, San Jose, and Oakland—claimed their spots in the top 10, with rents ranging from $1,960 to $2,449. While expensive Miami came in with a rent of $1,831, the monthly average increases were small at 0.23 percent.
If you want to live cheaply, go to Springfield, MO, where you can rent an apartment for only $503 per month. In fact, the most expensive of the top ten most reasonable United States apartments was Little Rock, AK, and the average price there is only $626.
Stay tuned as we head into 2019, but we don’t see any increased rent price volatility at this point.
What are you seeing in the markets you invest in?
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.