Smaller Cities Led Way in Rent Increases in 2014

[Chase Unperson]

http://www.wsj.com/articles/smaller-..._sections_news

Smaller Cities Led Way in Rent Increases in 2014

The cost to rent an apartment jumped in 2014 for the fifth consecutive year as strong demand and short supply left vacancies near historically low levels.

Nationwide, apartment rents rose an average of 3.6% last year, according to data from Reis Inc., a real-estate research firm.

The increase pushed the average monthly lease rate to $1,124.38, the highest since Reis started tracking the market in 1980. The vacancy rate last year was 4.2%, the lowest since 2000.

Rents were up in all 79 U.S. metro areas tracked by Reis. But unlike in earlier periods, when hefty rent increases mainly affected residents of the largest cities, the current ones are squeezing residents in smaller and midsize cities as well. Average rents were up 7.9% in Denver; 5.5% in Charleston, S.C.; and 4.8% in Raleigh, N.C.

Meanwhile, the massive metropolises typically known for big rent jumps, including New York and Chicago, had smaller rent increases, in part because those markets have had plenty of construction in recent years.

“The apartment-construction boom generally has added more supply in the largest cities, while secondary cities saw less supply growth,” said Ryan Severino, a senior economist at Reis. “That left renters in some secondary cities with strong job growth more susceptible to rent increases than their peers in tier-1 cities.”

Camden Property Trust, a Houston-based real-estate investment trust that owns 62,581 apartments across 10 states and the District of Columbia, owns units in several of the secondary markets that Reis lists among the biggest rent gainers last year.

In Denver, Camden registered a 6.5% revenue increase in the third quarter of last year from the comparable period a year earlier. The REIT notched a 6.7% increase in Austin in that time frame, and a 4% gain in Raleigh....

[hauntedheadnc]

I can't say I'm at all surprised. It's probably a combination of regional employment centers becoming more desirable and being able to charge more as rural areas continue to decline, and also the fact that more people want an urban lifestyle or something close to it, and are moving to a wider variety of cities to get something approximating that. It's no longer a matter of moving to the city to get it, but moving to a city to try for it. People want city living and having been priced out of the established big players, are moving to smaller and more affordable cities, increasing demand and driving up rents.

[mhays]

I wonder how much is just rents reverting to the mean, which is generally defined by development costs. If they used to be low and the economy is getting better, they can move up quickly. That would account for at least some of the list.

Meanwhile costs have risen substantially in some areas. Land costs can skyrocket, and local/national/global building cost indexes are rising again, with subsantial regional variation.

[dave8721]

Zillow put out a chart showing the cumulative change in rent's per metro (a big change means new units and higher prices). San Francisco led the way in largest increase in cumulative rent paid, followed by Denver, Pittsburgh (surprising), Seattle, Miami and Chicago.

http://zillow.mediaroom.com/index.ph...75&item=137119

[AaronPGH]

Originally Posted by dave8721

followed by Denver, Pittsburgh (surprising),

http://zillow.mediaroom.com/index.ph...75&item=137119

It's not surprising once you're on the ground here and get the lay of the land. Google massively ramping up hiring (along with a lot of other tech companies) at their campus here is putting pressure on rents across the East End. You get an influx of people who don't really have an idea of how cheap Pittsburgh used to be shelling out $1900+ for a brand new studio by the campus. And that pricing spreads out to the neighborhoods around it. Combine that with a lack of new product coming online fast enough, and an apartment occupancy rate in the mid-90s, and that's why that 10%+ jump in rent is happening.

Our city limits are very small. Big jumps in rent in half of the city will create a number like that.

[chris08876]

Credit: http://www.thenextmiami.com/index.ph...ks-live-miami/

[hauntedheadnc]

The rent is officially too damn high here in this smaller city, and for a very good reason. A recent study showed that our apartment vacancy rate is below 1%, and we would need almost 6,000 new apartments coming online right now to drive the vacancy rate up to the 5% that it takes to stabilize rent at a level approaching affordable.

If we're not officially in a housing crisis here, we're close.

[simms3_redux]

I know that there are varying renter vs home ownership rates and household sizes amongst the top 20 metros, but this is a look at 2014 per person expenditures using the link above for the top 20:

San Francisco $3,232.75
LA $2,604.44
San Diego $2,584.66
NYC $2,506.33
DC $2,252.15
Seattle $2,160.60
Boston $2,092.10
South FL $1,801.59
Baltimore $1,551.93
Chicago $1,499.38
Tampa $1,497.96
DFW $1,468.23
Houston $1,458.24
Inland Empire $1,415.24
Phoenix $1,409.49
US avg $1,382.88
Atlanta $1,303.65
Minneapolis $1,300.90
Philadelphia $1,283.03
Detroit $1,047.73
St. Louis $996.42

The entire SF metro (and SJ) are just off the charts. Anyone in any other city complaining about rents...

[Steely Dan]

^ man, i freaking love chicago. old-school real-deal urbanism, but at a sun-belt price point.

philly rocks in that regard as well.

Chicago and Philly: America's best urban values.

[Centropolis]

Minneapolis and Philadelphia (especially Philadelphia, damn!) is lower than I expected, and Baltimore is higher than I expected.

Texas is also a just tad pricier than I thought.

Back to Philadelphia...if I had an opportunity to transfer over there with an appreciably higher salary, it would be the one city east of the rockies (at this point) that I would consider the chance to move to. The numbers work so well, and it's got that "Bos-Wash" icing on a delicious Philadelphia cake, not to mention the ocean and the highlands of the NE not too far away. Flights back to the midwest are quick. Plus the climate is probably a tad mildier than my current climate, except for the snow I guess...just don't see myself moving to a colder climate as I am a field scientist who is lives and breathes the elements more than a normal "commuter."

[Chef]

Originally Posted by Centropolis

Minneapolis and Philadelphia (especially Philadelphia, damn!) is lower than I expected, and Baltimore is higher than I expected.

Outside of Uptown and Downtown a lot of Minneapolis is still pretty cheap. A decent 1br apartment in an early 20th century building in an ok neighborhood in the city can be had for $700 to $800 a month. Older ('60s to '80s era) apartments in some of the suburbs can be cheaper. The Twin Cities are in this weird spot where the vacancy rate is low but rents aren't high enough to drive anything more than niche luxury developments and rents aren't going up all that quickly.

[Ant131531]

Seattle is far more expensive than I imagined....seriously, it's going to be SF 2.0 soon. A city with far more demand than it can handle. Another playground for the rich developing.

[seaskyfan]

^ There's not the same kind of wealth in Seattle that you're seeing in places like SF and we don't have the same "second home for overseas wealthy people" dynamics you see in places like Vancouver. We're seeing a lot of jobs that pay a pretty decent salary but the stock options aren't what they used to be. The person paying $2K for a new apartment is likely making $80-100K a year but not sitting on millions of equity. I think after the current building boom things should calm down a little.

[mhays]

I'm being lazy and not looking into what the $2,000 refers to for Seattle. But our average rents are way lower than that.

A $2,000 rent is often someone making far less than $80-100k. People often (presumably often) pay 50% of their takehome, and it's not that hard if you don't have kids/car/debt.

[Centropolis]

Originally Posted by Chef

Outside of Uptown and Downtown a lot of Minneapolis is still pretty cheap. A decent 1br apartment in an early 20th century building in an ok neighborhood in the city can be had for $700 to $800 a month. Older ('60s to '80s era) apartments in some of the suburbs can be cheaper. The Twin Cities are in this weird spot where the vacancy rate is low but rents aren't high enough to drive anything more than niche luxury developments and rents aren't going up all that quickly.

minneapolis and st. paul probably have a colossal supply of early twentieth century apt buildings in ok neighborhoods, i'd imagine. makes sense.

[JManc]

Originally Posted by Steely Dan

^ man, i freaking love chicago. old-school real-deal urbanism, but at a sun-belt price point.

philly rocks in that regard as well.

Chicago and Philly: America's best urban values.

I couldn't help notice that about Chicago as well. Last time I was up there, ran into a woman who paid $1200/month on Lake Shore Dr.

[dave8721]

Interesting graphic breaking down the most expensive and fastest rising rents in the US (per metro). Suprised to see Houston as one of the metro's with the biggest decrease in rental prices:
https://www.zumper.com/blog/2015/05/...rt-april-2015/

[Ant131531]

Texas lost jobs last month in March so I'm not that surprised to see Texas cities dropping in rents, especially Houston where the energy sector took a massive hit.

[Leo the Dog]

Long Beach is a bargain for coastal LA.

[chris08876]

Cities #11-24 are bargains for 2 bedrooms. Not bad at all.

SF is on a different level. Was checking some prices out of curiousity on craigslist and you can get a beautiful, 1 bedroom, closet, 500 sq-ft for $3500 a month.

Cities turning into a Monaco.

Although redwood city has some good deals.