The US housing market has made great strides since The Great Recession, but few indicators have increased more than rental prices.
Not unlike how the real estate landscape is a seller’s market, those who own rental properties are enjoying the current state of the housing market.
If you are looking to build a passive income portfolio, you could do much worse than the cities where rents are the highest.
Have you ever wondered where the highest rent in US cities can be found? Which cities, specifically, can landlords expect to receive the highest rent in the US? If for nothing else, owing rental properties in a market where asking prices are high could increase your net operating income (NOI) considerably. It may literally pay to know where you stand to make the most money in the rental market.
The US housing market has become synonymous with cycles, not the least of which will witness significant rises and drops in prices. We have seen a great deal of equity return to places it was once thought gone forever. However, as prices have increased, so too have rental rates. In fact, rents are historically high throughout the US housing market, and there doesn’t seem to be any sign of them tapering off anytime soon. It’s worth noting, however, that while renters may not love the idea of paying more, those with passive income portfolios are enjoying the current state of the US housing market.
As the US housing market continues to flourish, one thing has become very apparent for non-homeowners: rental prices are rising. The surge in rental costs isn’t surprising, considering the national homeownership rate continues to drop. In 2018, homeownership dropped to a lower rate than it was in 1994, when the rate bottomed out at 64.2%. Simply put, fewer people are buying homes and turning to the rental market to meet their housing needs. As a result, demand in the rental arena has enable renters to increase prices at a rate that has kept pace with national home values.
“With homeownership rates falling, it makes sense for landlords to continue to raise pricing on their rental units, especially in markets with tighter inventory,” said Sam Radbil, spokesman for rental listings firm Abodo.
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Average Rent By City 2019 (Median 1BR Rent)
San Francisco, CA: $3,500
New York, NY: $2,750
San Jose, CA: $2,490
Boston, MA: $2,450
Los Angeles, CA: $2,420
Oakland, CA: $2,350
Washington, DC: $2,100
San Diego, CA: $1,950
Seattle, WA: $1,900
Miami, FL: $1,800
A Deep Dive Into The Most Expensive Rent In US 2019
The beginning of 2019 was relatively uneventful for rental markets across the country, as rent growth has tapered in recent history. As a result, changes resembled more of a flat line than exponential jumps on the charts for the cities with the highest rent in the US. The cities with the highest rent in US stayed relatively stable, with the exception of Miami reentering the discussion. It is worth noting, however, that while the most expensive cities didn’t see too many changes, the majority of large rent growths continued to be located in the mid to lower tiered markets.
According to Zumper’s latest National Rent Report, “the national one bedroom median rent grew 0.4% to $1,217, while two bedrooms increased 0.1% to $1,440 last month. On a year to date basis, one bedroom rent is down 3.1%, while two bedrooms are up 3.7%,” Now, let’s take a look at how the most expensive cities have done recently:
10. Miami, FL
The Miami real estate market continues to use its white sand beaches and vibrant lifestyle accommodations to its advantage, and the local rental market has become a primary beneficiary. As evidenced by the 2.9 percent year-over-year increase in one-bedroom rents, Miami still has a lot of rental demand, and savvy investors could use it to their advantage.
9. Seattle, WA
Real estate in Seattle has helped set the torrid pace for the national housing market as it continues to appreciate. However, as median home values have increased in recent years, so too have rental asking prices in Seattle. In the last year, rents have increased an impressive five percent. In the early part of 2019, however, asking prices have started to flatline.
8. San Diego, CA
Of all the cities with the highest rent in US, none saw rents increase more than the San Diego real estate market in the last year. As recently as the beginning of 2019, the median rent in San Diego for a one-bedroom apartment increased by as much as 12.7 percent over the previous year. Meanwhile, it’s safe to assume rents will continue to increase for the foreseeable future if prices keep headed in their current direction.
7. Washington, D.C.
The Washington, D.C. rental market managed to keep its place in the top ten cities with the highest rent despite its own rates dropping considerably. In the year leading up to 2019, the average rent for a one-bedroom apartment dropped by as much as 10.3 percent, making it the only city in the top 10 to decline by double digits. Despite the decline, however, Washington, D.C. still appears to carry plenty of potential for interested investors.
6. Oakland, CA
Yet another California city to make the list, Oakland is only second to San Diego when it comes to year-over-year rent growth. While the Oakland real estate market didn’t reach double digits like its southern counterpart, it did manage to increase average rental asking prices by as much as 8.8 percent in as little as one year’s time.
5. Los Angeles, CA
The Los Angeles real estate market saw rents increase by as much as 5.2 percent in the last year, but like many of the other cities on this list, rent growth started to temper as 2019 kicked off. In the month leading up to the new year, rent growth managed a modest 0.4 percent increase. Look for rent growth to remain capped for the foreseeable future by the already high prices in the area.
4. Boston, MA
The Boston real estate market took a step back from previous years, but with a rent growth rate of 7.9 percent in the last year, the city still managed to get fourth place. It is worth noting, however, that Boston saw a slight decline in rents recently, which seems to be the case with a lot of today’s primary cities.
3. San Jose, CA
The San Jose real estate market continues to be one of the nation’s hottest. As a result, San Jose has been able to not only maintain already high rents, but also grow them in one year’s time, albeit at a modest 1.2 percent.
2. New York, NY
Surprisingly, the New York real estate market managed a year-over-year decline in rental rates. Over the course of 2018, the average rental rate in New York declined 4.2 percent. What’s more, the rate doesn’t appear to be climbing. Again, rental rates in cities with prices as high as New York may be reaching their pinnacle.
1. San Francisco, CA
San Francisco has served as the poster child for the entire housing market recovery. If for nothing else, San Francisco sits on its own pedestal as the most expensive market in the country. However, despite being the most expensive city to rent in, San Francisco only managed a 2.9 percent growth in rent. In fact, leading up to 2019, rents started to decline, which could single yet another city on the verge of tempering.
Average Rent By City 2018 (Median 1BR Rent)
San Francisco, CA: $3,400
New York, NY $2,900
San Jose, CA $2,470
Boston, MA $2,300
Los Angeles, CA $2,250
Oakland, CA: $2,140
Washington, DC $2,130
Seattle, WA: $1,890
San Diego, CA: $1,800
Miami, FL: $1,730
A Deep Dive Into The Most Expensive Cities In The US To Rent
According to Zumper.com, rental prices nationwide for one bedroom units reached a record high in March, with a staggering 8.9 percent drop thereafter. However, the markets with the highest rent in the US have shown stability, such as in San Francisco, New York and San Jose. Although national trends for one bedroom rents has fluctuated in recent months, two bedroom units have shown stable growth.
Based on the median prices for a 1-bedroom, the following highlights the top U.S. cities with the highest rents:
10. Miami, FL
The Magic City continues to be a hotbed for rental properties and its monthly rent cost reflects the demand. The average rental price in Miami is now $1,730; However, in relation to income, only 6.9 percent of rental properties are affordable in the Miami metro area.
9. San Diego, CA
America’s “Finest City” has recently ranked on many real estate “hot lists,” such as one published by Realtor.com. San Diego is a strong seller’s market, which has given landlords the leeway to raise rent prices as long as housing inventory remains in shortage. Rental prices increased 13.9 percent year over year, the most drastic annual growth represented in the top 10 markets.
8. Seattle, WA
For a while, rental prices in Seattle grew at a faster rate than any other big city in the country. Previously the tenth most expensive city in the US, the Emerald City quickly outpaced Miami, FL. Rental prices increased at a 4.4% year-over-year.
7. Washington, DC
The nation’s capital was known for rapidly increasing rental rates over several decades, but it looks as though the tides may have turned. Rents for both one and two-bedroom units in the D.C. area have decreased, with a median one-bedroom rental rate of $2,130.
6. Oakland, CA
Located in the busy Bay Area of California, Oakland has quietly moved up rental ranking charts over the years. The median rental price for a one-bedroom in Oakland is $2,130, while a two-bedroom comes in around $2,470.
5. Los Angeles, CA
The Los Angeles real estate market is booming and rental prices mirror that uptick, as the average monthly rental price is $2,250. In terms of affordability, the troubling aspect in LA is rental prices are growing much faster for low-end apartments and homes, where annual rent growth has exceeded more than 27 percent in the past year. Without a doubt, it’s very, very expensive to rent in the City of Angels.
4. Boston, MA
Another city experiencing major growth in rental prices is Boston. The city has seen significant growth in the past year with rents increasing by 4.5 percent. The average monthly rental price for a 2-bedroom in Boston is $2,700, while 1-bedroom rates are at a median of $2,300. That said, the Boston real estate market is one of the more expensive in the country.
3. San Jose, CA
Nestled by the rolling hills in Silicon Valley, San Jose has become a real estate juggernaut with some of the highest rental prices in the nation, with an average monthly rental price is $2,470.
2. New York, NY
As #2 on this list, rental prices don’t get much more expensive than the Big Apple. New York is the epicenter for expensive real estate and renters are feeling it. In just the past month, rents for median two-bedroom apartment in New York increased 1.7 percent! The New York real estate market remains one of the hottest in the country.
1. San Francisco, CA
San Francisco and New York have rivaled each other for the title of most expensive city for renters. This time around, San Francisco takes the lead. With a median one-bedroom rent price of $3,400 ($500 more than the medium in the Big Apple), San Francisco shows no signs of relinquishing its position of having the highest rent in the US.
Many of the cities with the highest rent in the US housing market have continued to increase since they hit rock bottom at the depth of the last recession. And since rents continue to rise, those looking to build a passive income portfolio may find it difficult to accumulate assets with so much potential. As a result, it may be time to look into secondary cities, where prices are relatively high, just not as high as those mentioned above.
Was this list of markets with the highest rent in the US what you expected? Feel free to discuss your thoughts in the section below: