That said, in certain areas, renters can still find relative affordability—especially in the Midwest.
RENT GROWTH SHOWS SLOWER COOLING FOR ALL UNIT SIZES
In the January report, two-bedroom rental units saw a single-digit rent growth rate for the seventh consecutive month.
At $1,934 nationally, the median rent for two-bedroom units fell by $3 from the previous month and $122 from the peak. This is up $47 (2.5%) from the same time last year.
Though rent growth for larger units has slowed the most relative to last year, these units saw the biggest premium over the past three years—up 21.3% or $340 from three years ago, before the pandemic.
Rent growth for one-bedroom units also continued to cool. At $1,609, median rent was down $11 from the previous month and down $70 from the peak—but still up $44 (2.8%) from the previous year and up $262 (19.5%) from January 2020.
Rent growth for studios slid to 3.9%. As more renters search for affordable homes, studio rents have appreciated faster than rents for larger units.
At $1,417, the median rent for studio or “efficiency” units was down $15 from the previous month and down $56 from the peak—but still up $54 (3.9%) from the previous year and up $188 (15.3%) from three years ago.
Across the 50 metros in Realtor.com’s analysis, five of the 10 metros with the least expensive rents for 0-2 bedroom rentals—rents below $1300 a month—were in Midwestern states, while four were in the South and one in the Northeast.
No doubt it helps that, in these metros, relatively affordable for-sale properties make homeownership a more attainable option for a broader set of residents—giving renters an outlet when rent growth puts a squeeze on their budgets.
In some metros—like Birmingham, Memphis, and St. Louis—according to the December 2022 Rental Report, the monthly cost of purchasing a starter home was even more affordable than rent, tipping the scale in favor of ownership.
Data for these affordable markets suggest more households choose to buy rather than rent. Six of the affordable metros above have homeownership rates higher than the national average of 65.9%.
And while sales and sentiment data suggest home buyer interest remains low across the country, Rochester, NY, and Columbus, OH top Reatlor.com’s January Hottest Markets Report, showing just how in-demand these metros remain.
Also, on the supply side, seven of those ten affordable metros have a rental vacancy rate higher than the national average (5.8%), indicating a greater abundance of options for renters, which helps keep rental prices down (comparatively).
THE LEAST EXPENSIVE METROS ARE SEEING THE FASTEST RENT GROWTH
Unfortunately, cheaper rents don’t necessarily translate into slower rent growth.
In fact, compared with historical data, vacancy rates in many of these lower-cost areas are near their long-term lows, pointing to lower-than-usual rental supply in those metros.
In Q4 2022, for example, the average rental vacancy rate across these ten least expensive rental markets was 7.6% — down from a 9.7% vacancy rate in Q4 2017.
As a result, the following metros experienced the fastest annual rent growth in January 2023:
Indianapolis, IN (10.5%)
Birmingham, AL (8.8%)
Columbus, OH (8.3%)
Kansas City, MO-KS (8.2%)
Cleveland, OH (7.1%)
Rochester, NY (6.2%)
RENTAL REPORT METHODOLOGY
Realtor.com’s report is based on rental data as of January 2023 for studio, one-bedroom, and two-bedroom units advertised as for rent on Realtor.com®.
Rental units include apartments as well as private rentals including condos, townhomes, and single-family homes.
Rental sources report data reliably each month within the top 50 largest U.S. metro areas.
Realtor.com® began issuing regular monthly rental trends reports in October 2020, with data history reaching back to March 2019.