It’s not news that real estate is a business of flux.
People move – all the time! – or choose to rent a house instead of an apartment. Life circumstances call for downsizing or upsizing, and families for whom a duplex was once just fine now need their own detached home. Or vice versa. The only constant in real estate is change, which makes a perfect opportunity to put Rentometer’s rent evaluation tools to work.
We looked at rental markets across 4 main metropolitan areas of the United States:
The bar graphs below show the year-over-year rent movement in each market. For example, Chicago closed out 2019 with a median rental rate of $2,675 per month for a two-bedroom, 1 1/2 bathroom unit.
Starting in 2020, you would expect a slight increase in rent – which is what we see in January 2020. An investor could see Chicago as a good investment, with year-over-year average rates predicted to be higher for the first three months before leveling in April – a typical seasonal prediction.
Moving ahead, May’s average rent starts to trend down. And if you take a closer look at actual rents paid (the green line), rents held firm until May 1, 2020, after which the number takes a sharp dive.
Some observers may make the case that March and April were not great months because they showed only a slight uptick in rents. And with May’s drop, landlords and investors with models that banked on January rent levels start to worry about cash flow and how to pay the mortgage.
The big questions: How will May close? What’s in the cards for June?
Before we examine additional data, let’s look at patterns in other metro areas.
At the end of 2019, average rents in Los Angeles – for the benchmark two-bedroom, 1 ½ bath unit – were right around $3175 per month. Starting in January, rents edged up, $22 higher than December, and $75 more year-over-year. Not too bad. February rates jumped as predicted (blue and orange bars), and the data suggested higher-than-2019 rates would hold through May.
Going into March and April, rents take a sharp dive then tick up slightly in May. For an investor and landlord, this instability is problematic. While it’s great to see May on the positive side, will that hold for June? Only time will tell. If California is on your radar for investment, you could also look at San Francisco to see how the market has performed there.
In San Francisco, 2019 ended well. A benchmark unit rented for an average rate of $4,851 per month. All indicators pointed to even higher year-over-year rates going into 2020. This pattern is holding; San Francisco shows up as a crazy anomaly amidst falling rates in the rest of the country. Rents rose steadily in February and showed a massive spike in March.
Even with April rents down slightly, year-over-year levels still rose above 2019. While May rental rates are dropping, you can see these rates still almost dead even with year-end 2019. Overall, rates held their value for the first five months. Will June continue to trend down? This is the question as we approach June 1.
The picture is clear – Washington, D.C. rents are not faring well so far in 2020.
January and February saw nice increases over 2019’s year-end rate of $2,910 per month for a benchmark two-bedroom unit. 2020 showed the predicted year-over-year improvements until May when rates dipped slightly negative. Actual rent amounts trended down for March, April, and May. Investors and landlords here will be watching to see if this trend continues or if the market will bounce back and even see rates that match those from December 2019.
At Rentometer, we await the data. We’ll pull the same report for June 1 to follow the path of changing rents.
Which metro areas would you like us to explore?
Get your data by running reports at www.rentometer.com.
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