The national average apartment rent in January was $1,463, up three percent year-over-year and the slowest pace in 18 months, according to a report from Rent Café.
The report says rents “are likely to maintain an upward streak throughout 2020, as the number of renters continues to rise in the (United States).”
The demand for apartments is high, including among those renting by choice. Statistics show that 157 percent more Americans who earn over $150,000 per year began renting this past decade, showing a preference for a more flexible and comfort-driven lifestyle, according to the report.
Experts foresee lifestyle will drive apartment trends in 2020
Real estate and economy experts agree that the change in Americans’ attitudes towards housing is an important factor in the evolution of the apartment industry. People of all ages are increasingly being driven by mobility and lifestyle enhancement, displaying a growing preference for amenity-rich buildings in walking distance of urban centers. Experts predict this change in housing preferences will stimulate developers and builders to deliver more apartments.
However, they also note a lack of affordable housing brought on by increasing land and labor costs in the construction industry, remarking that one of this year’s most significant challenges will be achieving a balance between delivering both quality and affordability.
Not all experts agree that choice is driving rentals
“I’m skeptical of the view that the increase in rentals is driven by ‘choice.’ Respondents to Fannie Mae’s National Housing Survey consistently report that they would prefer to own rather than rent,” said Benjamin Keys, Ph.D., Rowan Family Foundation Associate Professor and Associate Professor of Real Estate at The Wharton School, The University of Pennsylvania, in the report.
“The rise in rentals is more likely driven by constraints rather than preferences:
- “First, house prices are extremely high, especially in the places with the most desirable labor markets.
- “Next, mortgage credit remains extremely tight, as minimum credit scores and documentation requirements remain far more stringent than they were before the financial crisis.
- “Finally, millennials have suffered the double-whammy of entering their peak employment years during a weak labor market and bearing the burden of substantial student loans.
“All these factors are more likely to be driving increased rentals rather than changes in preferences,” Keys said.
“Going forward, I expect house prices to remain high as demand outstrips supply. Simply put, there is not enough new construction to meet demand in the cities where the jobs are. Construction shortages are a function of higher costs for materials, higher labor costs, and more onerous local political barriers to building,” Keys said in the report
80 percent of largest renter hubs have rents below $2,000
The report on national average apartment rent says 16 out of the 20 largest apartment hubs kept rental rates below the $2,000 mark in January. Two of these cities have rates below $1,000: Indianapolis and Columbus. Indianapolis apartments are the cheapest out of all urban renter hotspots, with an $887 average rate.
When it comes to rent hikes, Phoenix takes the lead, with an 8.3 percent increase since last year, closely followed by Las Vegas, where rates grew by a lower but still significant 5.9 percent. Population migration explains the hikes in both cities — Phoenix and Las Vegas are among the most popular destinations for Californians looking for more affordable lifestyles, so rents are growing as the cities have to accommodate an increasing number of residents.
Around the country, apartments for rent in Atlanta went for $1,477 in January, apartments in Washington, D.C. for $2,233 per month, and Tampa apartments rented for an average of $1,33.