Rents across the country reached new highs in July. In 40 of the 50 largest metro areas, rents reached their highest levels on record, and are growing faster than ever.
In July 2021, the median national rent reached $1,607, an increase of $143 (9.8%) year-over-year. Monthly rent growth slowed slightly; in May and June, rents increased by 3.0% and 3.2% from each month to the next. In July, rents grew 2.0% over last month, perhaps signaling that the summer surge is approaching its peak.
As home prices hover around record highs and affordability becomes an issue for potential homebuyers, the appetite for rentals may be rising as would-be buyers opt for renting. This increased demand–especially for larger units–is driving up rents around the country.
Riverside, CA, which has seen rents grow by a whopping 30% since last year, still has a median rent $512 lower than neighboring Los Angeles. For renters looking for more space, they’re finding those options looking beyond their big cities. And unfortunately for renters, this level of savings means there is still room for rents to grow before they stabilize.
Riverside, CA was the fastest growing metro area, with the median rent reaching $2,230 in July, up 29.7% year-over-year. The other metros topping the list of fastest growing rents were Tampa, FL; Memphis, TN; and Phoenix, AZ, which all saw rents growing by over 23% compared to last year.
Larger Units Are Driving Rent Growth
In July, two-bedroom units saw the largest increase in rents, with the median rent reaching $1,802 nationally, $177 (10.9%) higher than the same time last year. Thanks to consistent preferences for larger homes over the last couple of years, the median monthly rent for 2-bed units has increased by $238 (15.2%) since July 2019 and is now at the highest level in our data history.
One-bedroom units also saw sizeable rent growth in July. The median rent for 1-bedroom units reached $1,495 nationally, up $130 (9.5%) compared to last year. The median monthly rent for 1-bed units has increased by 12.4% ($165) since July 2019, reaching the highest level in our data history.
Studio units are continuing their recovery, with rents reaching $1,315 nationwide in July, up $70 (5.6%) year-over-year. The median monthly rent for studio units has increased by 80 (6.5%) since July 2019 and is at the highest level in our data history. Nationally, studio rents were dipping by as much as 5% earlier this year, but have steadily recovered as larger cities have seen residents returning.
With Rents Rising and Mortgage Rates Low, Buying Costs Less Per Month Than Renting in Nearly Half of the Largest Metros
With rents reaching all-time highs and growing at record rates, the rent-vs-buy equation for “starter homes” offers options for renters looking to buy. In 24 of the 50 largest metros, buying was a more affordable option than renting in July.
First time buyers who are hoping to transition from renting to owning may find affordable options in many housing markets around the country.
The median listing price for a “starter” home, one with up to 2 bedrooms, reached $297,000 in July, up 5.9% on average in the 50 largest metros. On average, rent growth has outpaced the monthly cost of buying a home. Despite fast-rising home prices, historically-low mortgage rates have kept monthly costs in check. The monthly cost of a starter home in the 50 largest metros rose by 5.5% since last year. Meanwhile, rents have grown 9.8% in that same period.
Our rent report looks at studio, 1-bed, and 2-bed units. As a comparison, we looked at homes for sale in that same size range (i.e. “starter” homes) and compared the monthly costs using the median listing price for that segment of homes in each metro area (see Methodology).
In markets that favored buying, the monthly cost of buying was 15.5% ($216) lower than the cost of renting, on average.
Birmingham, AL tops the list of markets that favor buying, where the monthly cost of buying a “starter” home was $728 in July, which was 33.1% less than the monthly rent of $1,089, for a monthly savings of $361. St. Louis, MO; Pittsburgh, PA; Orlando, FL; and Cleveland, OH metro areas round out the top five markets where the cost of buying was lower than the monthly rent.
In the top 10 metros that favored buying over renting in July, monthly payments for starter homes were 24.3% lower than rents, driven in part by lower median listing prices ($192,000) than the national rate ($297,000). The types of starter homes for sale also play a key role in monthly payments, with active inventory in these buyer-friendly metros including nearly two times the share of single-family starter homes (56.1%) than in condo-heavy markets that favor renting.
Tech Cities Still Favor Renting Over Buying
In tech cities, where real estate comes at a very high premium, renting costs less than a monthly mortgage payment for buyers. Austin, TX; San Jose, CA; Seattle, WA; San Francisco, CA; Los Angeles, CA; and Boston, MA all top the list of housing markets that favor renting.
Typically some of the nation’s most expensive housing markets, big tech hubs largely favored renting over buying a starter home in July, partly attributed to higher condo HOA fees. Among 0-2 bedroom homes in these top 10 cities, over seven-in-ten (71%) were condos, on average, compared to 58% nationwide. In the top housing markets that favored renting, median HOA fees of $334 among homes that had this fee were 27% higher than the U.S. median HOA fee ($263).
Since the pandemic, rents in major tech centers experienced substantial declines and have been slow to recover. In San Jose, the monthly cost of buying a “starter” home is $4,332, which is 47.5% greater than the monthly rent of $2,936, for a monthly savings of $1,396.
In Austin, TX, starter home listings are down 59% compared to last year. They’re hard to come by and they’re getting more expensive, reaching $431,000 in July, up 17.7%, or $65,000, year over year. The result is a widening gap between the monthly cost to rent versus buying. In Austin, the monthly cost of buying a “starter” home is $2,778, which is 79.2% greater than the monthly rent of $1,550, for an added monthly cost of $1,228.