Annual Rent Report: What Trends Did U.S. Markets See in 2018?

by | BiggerPockets.com

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.


Related: Market Data Report: Renting Looks More Attractive Than Ever in 2019

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.

State Report

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.

housing-market

Related: How to Use Price-to-Rent Ratio to Analyze a Location

One-Bedroom Apartments

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.

Two-Bedroom Apartments

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?

Weigh in with a comment!

About Author

Sam Radbil

Sam Radbil is an author at ABODO apartments, an online apartment marketplace that helps renters find apartments all across the country. ABODO reports on rent rates, the changing of real estate markets and trends within the industry.

16 Comments

  1. Nancy Roth

    @SamRadbil

    Thank you. As a resident of Washington DC I have to nitpick just a little on the characterization of DC as the state with the highest rent. DC is a city, not a state. It has no rural or suburban areas to mitigate its average rental prices, as do the other states cited. I think it belongs in the paragraph about rental rates in cities, such as San Francisco, New York, Cambridge, etc. With the cited average rent of $2,358 DC would certainly fit within the top ten, but not it’s not at the top of the list by a long shot.

    Wanted also to ask if you have any thoughts about how investors might use this information for future acquisitions or sales. Appreciate the time you spent putting this together.

  2. Proncias MacAnEan

    Small point on the San Francisco rent figures. Those numbers refer to the market rate for rents. And that is very useful for tenants.

    For landlord the numbers are completely different for rents received. Most of San Francisco has rent control, so the actual rent paid averages about $1600pm.

    For instance, I have a tenant in a 3bd paying $750pm. The market rate for that place is around $4K.

    • Sam Radbil

      We totally understand that rent controlled units play a factor in pricing. We also know that relocation packages for corporations moving employees to the Bay Area can make for cheaper rent payments as well. A lot of factors can have an impact.

  3. Amy Pfaffman

    I can report that in about a year, I got to raise the rent in one of my Atlanta rentals from $908 to $940, and that’s a Section 8 tenant in both cases. Also, I’ve seen fantastic appreciation the last three years, since I started investing there. The market has gone up so much there that I’m starting to buy in Birmingham, AL. Time will tell how it goes renting there.

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