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Smaller Cities Winning Big in Rental Demand


Data from Zumper found that smaller cities on the outskirts of larger metropolitan areas are experiencing rent growth as affordability issues linger across the nation. 

Oakland, California, saw a 62% increase in rental demand from 2018 to 2019, while San Francisco’s demand grew by 23%. The report states many renters are being priced out of San Francisco, with rental prices hovering around $3,500. 

Other satellite cities that saw larger rental demand as opposed to their larger neighbors were: Scottsdale, Arizona (62% compared to Phoenix’s 22%) and St. Paul, Minnesota (33% compared to Minneapolis’ 21%). 

Zumper states that Dallas and Minneapolis saw rents decline over the past year, falling 4% and 2%, respectively. Their respective satellite cities—Fort Worth, Texas; and St. Paul—both recorded growth of 4%. 

CoreLogic recently reported that single-family rent prices rose 3.1% annually, which is being propped up by low-end rentals with prices less than 75% of the regional average. Low-end rentals were up 3.6% year-over-year in October 2019.

The increase in single-family rental prices was fueled by the low rental home inventory, but price growth has slowed since February 2016. High-end rental prices grew alongside low-end, up by 2.9% from October 2018.

“Increases in low-end rent prices have outpaced those on the high end for more than five years as newly-formed households push up demand for entry-level rentals,” said Molly Boesel, Principal Economist at CoreLogic. “However, high-end rents gained momentum for the sixth consecutive month in October 2019, while low-end rates slowed for the first time in roughly five months–resulting in the narrowest gap in rent growth for these price tiers since 2014.”

By region, Phoenix had the highest year-over-year increase in single-family rents in October 2019 at 6.8%. Following Phoenix, Seattle took the second-highest rent price growth in October 2019 with gains of 5.8% and 5.4%. Phoenix, alongside Seattle, had high year-over-year rent growth driven by annual employment growth of 2.6% and 2.9%.

Phoenix and Seattle's year-over-year rent growth was driven largely by annual employment growth of 2.6% and 2.9%, respectively, larger than the national average of 1.4%.

About Author: Mike Albanese

Mike Albanese is a reporter for DS News and MReport. He is a University of Alabama graduate with a degree in journalism and a minor in communications. He has worked for publications—both print and online—covering numerous beats. A Connecticut native, Albanese currently resides in Lewisville.

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