US rental prices continue their parallel upward trend in tandem with soaring prices in the real estate market. A recent report found that average rates went up by 8.1% in the year to June with some metros seeing price hikes of over 20%. Two Florida metros ranked among those with the highest increases including Tampa, the third highest in the country.
June hike for US rental prices
Realtor.com conducted a study of metro areas in July comparing rental rates in 50 of the largest. The results showed that prices went up by 8.1% on average in the 12 months to June. This increase brought the national medium to its highest ever – US$1,575 a month.
Furthermore, the study revealed that 44 of the 50 metro areas registered new highs for rental rates.
Tampa sees third-highest hike
Riverside in California ranked at the top of the list with the highest US rental prices. The metro area close to LA saw rates go up by 24.2% in the year to June taking them to an average of US$2,112 a month.
Tampa in Florida also experienced a big increase in rents. According to the survey, average rates for Tampa rentals reached US$1,605 in June. This translates to a 21.1% increase in the year and it ranks as the third highest in the country.
Jacksonville, also in Florida, ranked tenth on the list. In this metro area, rates went up by 14.4% year-on-year to reach an average of US$1,310.
Tight supply pushes rates up
Lack of supply is the main reason behind the skyrocketing rental prices in the US. Inventory levels are, according to Realtor.com, historically low. Demand, on the other hand, is high and as a result, rental rates keep on rising.
In many respects, the rental market mirrors the real estate market. Both have ever-rising prices, pushed up by ever-growing demand and dwindling supply. In addition, US rentals are feeling extra pressure from would-be buyers who are unable to buy because of the lack of homes on the market.
Smaller metros feel the squeeze
Not all metros are showing the same trend in rental rates. In some of the largest in the country such as San Francisco, New York City and Boston, rents cost less than what they did a year ago.
Analysts attribute these lower prices to changing trends in lifestyle over the last 12 months. For example, smaller cities have become more attractive and have cheaper lets.
“These more affordable areas near larger urban areas became more attractive to remote workers seeking more space during the pandemic”, said Danielle Hale, Chief Economist at Realtor.com
As a result, smaller metros like Tampa and Jacksonville have seen an exponential rise in demand for rental properties with the subsequent pressure on rental rates.
Additional buy-to-let potential
Recent market trends enhance the potential for buy-to-let investments in the US, particularly in those metros that offer affordability for remote workers. Tampa and Jacksonville are two such examples and both have seen increases in their population over the last 18 months.