The cost of renting is to continue rising this year as young professionals and baby boomers are attracted to increasingly revamped metro centers, particularly in the South and the Midwest, according to a report by rental listing website ABODO. The report also said recent interest rate rises could further widen the affordability gap facing many potential homebuyers.
The prediction comes as ABODO reported that the average monthly apartment rent increased a total of $85 from January through December of last year, while the average renter paid $1,001 a month to live in an apartment.
San Francisco topped the list of cities with the highest rents in January of this year, with an average of $3,526 for a one-bedroom. New York dropped to second place at $2,935, with San Jose next at $2,508 and Boston at $2,423.
The latest figures from ABODO line up with other data that show rising rents nationwide as strong demand puts pressure on languishing supplies.
Online apartment finder Zumper reported last week that the national median rent increased 2.6% in January compared to the same period last year. It comes despite rents in the country’s largest markets like San Francisco, Washington, DC and New York showing recent signs of easing as concessions are reportedly being put forward by developers to fill apartment projects planned and built during the post-recession multifamily boom.
Other areas of the country are seeing large increases, with ABODO noting that rents jumped 8.6% in January in Baton Rouge, LA, which drove the average one-bedroom rent price up to $942, while rents in Reno, NV, increased 5.4% and San Antonio, TX, saw a 3.4% rise. ABODO added, however, that significant declines in places like El Paso, TX, Cincinnati and Buffalo, NY, offset the rent rises in other cities, resulting in a drop in the national average one-bedroom rent price of 1.35% in January.
The rental market is expected to strengthen further on growing demand, with the The Urban Institute forecasting the number of renters will balloon to almost 48 million in 2020 and 54.1 million in 2030 compared to 40.7 million in 2010.
The booming rental market following the recession has attracted more interest from investors and developers in the single-family segment of the market. Invitation Homes LP, the U.S. single-family home rental business owned by private equity firm Blackstone Group LP, is moving forward with an initial public offering (IPO), while former Goldman Sachs Group executive Donald Mullen Jr. is looking to raise $1 billion to purchase foreclosed single-family homes to convert to rentals.