3 Midwestern states now rival Florida and New York in charter flights
It’s no surprise that rents in high-priced locations like New York and Florida are always on the rise, but skyrocketing rents in Midwestern markets can be a real head-scratcher. Rent.com’s December National Rent Report indicates that rents in three Midwest locations are now rising at roughly the same percentage rate as two of the nation’s higher-priced markets.
While New York and Florida held the top spots with annual increases of 31.7 and 23.0 percent, respectively, South Dakota saw an increase of 22.3 percent, Arkansas was hit by a 17 percent rise, and in Nebraska, rents were up 14.5 percent. Among the largest annual increases, Utah was furthest west with a 13.7 percent increase in average rental prices.
John Leckie, a researcher for Rent.com, told The Epoch Times that the increases in the Midwest are likely a result of more people flocking to the area.
“The trend of people leaving the Northeast and West coast continues as people look for more affordable options,” he said. “Typically, the Midwest and South were lower-cost areas, and the more popular they are, the higher the rents there.”
But still affordable
However, median statewide rents in those areas fall within the national median monthly rent of $2,007. Average rents in Nebraska are $1,290, followed by $1,130 in South Dakota. Rentals in Arkansas are among the cheapest at just $989.
The Rent.com report aggregates all bedroom types together and calculates the average cost based on rental numbers across the state. “A lot of people are still working remotely and looking for less expensive, more spacious places to live,” Leckie added.
Nationally, the monthly average increased by $24 from $1,983 last month. On an annual basis, rents rose again but remained in the single digits for the third month in a row. The increase of 7.45 percent was the lowest increase during that period.
Among the 50 most populous metro areas in the United States, the Raleigh-Carey, N.C., metro took the top spot from Oklahoma City, Oklahoma, with rents increasing 21.9 percent year-over-year. The 17.9 percent increase in Oklahoma City in Indianapolis-Carmel-Anderson, Indiana, approached an increase of 15.8 percent. Cleveland Elijah, Ohio, and Nashville-Davidson-Franklin, Tennessee, were both capped at about 15 percent.
The Rent.com report shows the average monthly rental cost of $2,100 in Raleigh Cary and $1,234 in Oklahoma City. Despite high percentages of price increases, rents there and in other areas of the Midwest and South are still relatively affordable compared to average monthly rents in areas such as New York City at $4,010, San Francisco, California, at $3,681 and Boston , Massachusetts, at $3,628.
5 states have experienced lower rents
Only five states saw rents decline year-over-year, with Nevada leading with a 3.8 percent decline and Idaho with a 1.2 percent decline for the second month in a row. Maryland, Georgia and Virginia also saw a slight decrease in average monthly rents.
“Boise, Idaho, became the perfect picture for runaway housing costs during the pandemic, as people started to congregate there,” Leakey explained. “Now there is a cooling down there, and also in Atlanta, as the cost of living is becoming more and more affordable. And the steeper the rents go up, the faster those prices start to come down.”
Leakey noted that there has always been an ebb and flow in rents across the country as locations rise and fall in popularity.
“In addition, there comes a point where people are not willing or unable to pay high rents, and that’s when they start looking for roommates to share the costs,” he said. As a result, there has been a higher demand for two- and three-bedroom rental apartments.
US metro areas that saw rent declines year over year include Milwaukee-Waukesha, Wisconsin (-13.1%), Houston-Sugarland, Texas (-6.3%), and Austin-Georgetown, Texas (-4.4%). Areas like Minneapolis-St. Rents in Poole, Minnesota, Chicago Elgin, Illinois, and Dallas-Fort Worth, Texas, all ranged from 3 to 4 percent in rents.
Leakey acknowledged that “climate problems such as storms and hurricanes could be partly responsible for lower prices along the Gulf Coast.”
Expect a downtrend
Based on their latest numbers, Rent.com experts expect the downward trend to continue into 2023. “Despite the fact that rents have gone up, year-over-year increases have remained in the single digits for three consecutive months,” Leakey said.
In its 2023 housing market outlook, Redfin expects a slight year-over-year decline in rental prices by mid-2023 as supply increases, particularly in single-family rental homes. The report indicates that potential homebuyers will continue to wait for the unpredictable housing market and upgrade from smaller units while they look for prices to cool and inventory to increase.
“The decline in rental prices is partly due to oversupply, which has already led to a slight increase in vacant units in apartment buildings,” the report states. “Multi-family building is at a 50-year high, which means hundreds of thousands of new rental units will be available next year.”
Another prediction is that many homeowners will rent out their homes rather than sell them because they do not want to lose out on a low interest rate on a mortgage. This trend, in turn, may cause potential first-time homebuyers to opt for single-family home rentals while waiting for prices to drop.
“Some Gen Zers and young millennials will focus on financial endeavors other than home ownership next year, while continuing to rent indefinitely,” the report concluded.
Meanwhile, the National Association of Realtors (NAR) expects home sales across the country to fall nearly 7 percent in 2023 — from 5.13 million to 4.78 million. The national median home price is expected to be $385,800 — up just 0.3 percent from this year.
“Half of the country may see small price gains, while the other half may see small price declines,” said Lawrence Yoon, chief economist at NAR and senior vice president of research.
“However, markets in California may be the exception, with San Francisco, for example, likely recording price drops of 10-15%.” Yoon also expects rents to increase by about 5 percent in 2023 and foreclosure rates to remain at historically low levels — less than 1 percent of all mortgages.
NAR’s top 5 real estate picks for 2023 are: Atlanta-Sandy Springs-Marietta, Ga.; Raleigh, NC; Dallas Fort Worth Arlington, Texas; Fayetteville Springdale Rogers, Ark. , and Mo. ; and Grenville Anderson of Mauldin, South Carolina
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