March 2023 Rental Report: Midwest Surges as Western Markets … – News

In March 2023, the U.S. rental market experienced single-digit growth for the eighth month in a row after fourteen months of slowing from a high market of 16.4% growth in January 2022. Median rent across the top 50 metros was up just 2.5% year-over-year for 0-2 bedroom properties. The median asking rent was $1,732, up by $15 from last month and down by $32 from the peak but is still $354 (25.7%) higher than the same time in 2019 (pre-pandemic).
Despite a slowdown in annual rent growth, concerns about affordability are still on the rise. A recent study from the Federal Reserve Bank of Kansas City pointed out that a tight labor market could keep rent prices high. While the job market showed signs of cooling in March, higher-than-usual wage growth (4.2%) and a record-low unemployment rate (3.5%) could continue to boost strong rental demand. Meanwhile, nearly 90% of respondents of the most recent Fannie Mae’s National Housing Survey believed home rental prices will not improve in the next 12 months, reflecting a more gloomy outlook compared to the end of 2022. 1  In addition, the New York Federal Reserve’s 2023 Survey of Consumer Expectations (SCE) Housing Survey shows that while expectations of rent increases have moderated, they remain high compared to historical standards and in comparison to expectations of home price growth. 2 
Interestingly, consumer expectations of moderating rent growth are consistent with pricing trends for existing home sales, for which the median price has declined modestly in the most recent two months, but home asking prices continue to outpace growth in rent price. Regionally, rents are outpacing home price growth in the Northeast and Midwest, a sign of the relative strength of the economy in these regions. Meanwhile, rents are underperforming home price growth in the Sunbelt and West, which could signal more challenges ahead. 

In March 2023, the rent growth of two bedroom units increased just 2.0%, marking the slowest growth rate since the onset of the pandemic. Nevertheless, March is the third straight month that we saw positive rent gains in two-bedroom on a monthly basis.The median rent for two bedrooms was $1,901 nationally, $37 (2.0%) higher than the same time last year but still $46 lower than the July 2022 peak. Even though rent for larger units had the smallest gains relative to last year, larger unit rents had the highest growth rate over the past four years, up by $407 (27.2%).
Rent growth for one-bedroom units went up and down on a year-over-year basis in recent months, reaching 3.5% in March 2023. In addition, March is the fourth straight month that we saw positive rent gains in one-bedroom on a monthly basis, a possible return to typical trends that have been absent amid the upheaval of the pandemic and subsequent recovery. In March, the median rent increased to $1,637, up by $16 compared to last month but still $5 less from the August 2022 peak. Nevertheless, the median one-bedroom rent is still up by $55 (2.5%) compared to the previous year and $352 (27.4%) higher since March 2019.
In March, rent growth in studios rebounded to 4.7%. As renters sought affordability, studio rents grew faster than larger units over the last eight months. The median rent of studios was $1,451, down by $12 compared to last month. Nevertheless, it is up by $65 (4.7%) year-over-year and $259 (21.7%) higher than four years ago–a significant jump that is only slightly smaller than that seen in larger units.

The recent wave of job cuts in the tech industry has likely impacted the rental demand in  large metros on the west coast. In March 2023, the median rent in the West was 0.7% lower than a year ago. Specifically, rents in San Francisco, CA (-0.8%) and Los Angeles, CA (-0.8%) saw their first year-over-year declines in nearly 2 years. While Seattle, WA (0.8%) and San Diego, CA (2.0%) still experienced positive rent growth, both rates were below the national average (2.5%). Although San Jose, CA (4.5%) appears to be an outlier in March, its growth rate was only one fourth of what it was a year ago, and is more likely to continue to trend downwards in the coming months. While the median rent in the West was lower than last March (-0.7%), the median asking price of 0-2 bedroom for–sale property continued to grow, though at a slower rate (1.0%).
In contrast, rents in populous northeastern metros such as New York, NY (10.2%), Boston, MA (5.7%), and Washington D.C (4.4%) continued to experience faster growth.  In addition, the rent growth in the Northeast has outpaced the growth rate of home asking prices. In March 2023, the median asking rent for a 0-2 bedroom property in the Northeast was 7.2% higher than a year ago, but the asking price for a typical home was only 3.4% higher than the same time last year. 
Rental markets in the Sun Belt metros continued to cool faster than other parts of the U.S. In March 2023, the year-over-year growth rate for 0-2 bedroom rental properties across Sun Belt metros was 0.2% (vs. 2.5% nationwide). It is also slower than the price growth rate of the same type of for-sale homes in this region (4.6% YOY).
The top 5 metros experiencing the most significant year-over-year rent declines are all clustered in the Sun Belt regions: Riverside, CA (-5.3%), Phoenix, AZ (-4.7%), Las Vegas, NV (-4.3%), Tampa, FL (-2.7%) and Austin, TX (-2.5%).  While Sun Belt markets have cooled faster, the median asking rent in the region was still $408 (27.2%) higher than four years ago (pre-pandemic), higher than national rent growth for the same four year period (25.7%).
On the flip side, rents in Midwest metros continued to see faster rent growth. In March 2023, the median rent growth rate was 5.9%, outpacing the price growth of 0-2 bedroom homes (4.2%). As the Midwest markets tend to have greater affordability, the stronger growth in these markets likely results from this benefit even as it may reduce existing affordability. Among the top 10 metros experiencing the fastest year-over-year growth, six of them are located in the Midwest: Indianapolis, IN (10.3%), Cincinnati, OH (9.6%), Milwaukee, WI (7.8%), St. Louis, MO (7.4%), Chicago, IL (6.8%) and Detroit, MI (6.6%). The other four metros are  New York, NY (10.2%),  Pittsburgh, PA (8.3%), Louisville/Jefferson, KY-IN (7.4%) and Oklahoma City, OK (9.2%). Interestingly, Oklahoma City was found to be both the least expensive and the most affordable metro for renters based on our previous reports. However, the stronger growth in annual rents in this area may eat into that rental affordability advantage. 
Rental data as of March for studio, 1-bedroom, or 2-bedroom units advertised as for-rent on®. Rental units include apartments as well as private rentals (condos, townhomes, single-family homes). We use rental sources that reliably report data each month within the top 50 largest metropolitan areas.® began publishing regular monthly rental trends reports in October 2020 with data history stretching back to March 2019.
With the release of its March rent report,® incorporated a new and improved methodology for capturing and reporting more comprehensive rental listing trends and metrics. The new methodology is expected to yield a cleaner, more representative and more consistent measurement of rental listings and trends at both the national and local level. The methodology has been adjusted to better represent the true cost of primary housing for renters. Most areas across the country will see minor changes with a smaller handful of areas seeing larger updates. As a result of these changes, the rental data released since March 2023 will not be directly comparable with previous releases and® economics blog posts. However, future data releases, including historical data, will consistently apply the new methodology.
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