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Cities Where Rent Growth Is Slowing Down the Most as of Q3 2022

Published: 12-08-22 Category: Insight

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

Rent prices across the United States have continued to rise steadily for the past decade. However, in some select cities, rents are beginning to decrease.

Plenty of factors affect the growth of rental prices in any given city. Some are obvious, like supply and demand; others are more subtle, like zoning laws, taxes, and rising interest rates due to inflation.

Here are the cities where rent growth is slowing down the most as of Q3 2022, along with an analysis of why this is happening and what it means for prospective renters and multifamily real estate investors.

#10 – Irving, Texas

In Irving, Texas, the average price of a rental for a one-bedroom apartment slunk down to $1,390 a month. This is a -5.40% rental rate loss since Q2 2022.

Rental rates can fluctuate for a multitude of reasons, but unfortunately, rent fluctuations in Irving, Texas, aren’t due to positive ones.

#9 – Milwaukee, Wisconsin

The average price of rent for a one-bedroom apartment in Milwaukee, Wisconsin, is now about $970 a month. This represents a -5.80% loss in rent growth since Q2 2022.

Milwaukee has been and continues to be an affordable city to live in. This means that small decreases such as this can impact your portfolio’s profitability if you hold multifamily assets in Milwaukee.

#8 – Columbus, Ohio

Columbus is a major economic and cultural hub in the state and the Midwest. The city’s economy is growing quickly as businesses are drawn to the city’s strategic location.

In Columbus, Ohio, rental rates dropped -5.80% since Q2 2022. This puts the average rent for a one-bedroom apartment in the area at around $1,140 a month.

#7 – New Orleans, Louisiana

The average monthly cost of a one-bedroom apartment in New Orleans, Louisiana, is now $1,450 a month, which is a -5.80% decrease from Q2 2022.

The city’s economy is growing, but this growth hasn’t been distributed evenly throughout the city. This, along with a large influx of short-term rentals, is affecting the prices of rentals for long-term tenants.

#6 – Tulsa, Oklahoma

Tulsa is known for its affordable cost of living and friendly people, and there are many apartments and homes for rent. In Tulsa, Oklahoma, the average monthly rental cost is $950 a month, which is a -5.90% decrease from Q2 2022.

#5 – Durham, North Carolina

Durham has a diverse economy, with a mix of research, education, health care, government, and manufacturing industries. Despite rental growth in nearby cities in North Carolina, such as Charlotte, Durham is experiencing some losses in rental growth.

The average cost of a one-bedroom apartment is $1,270, which is -5.90% less than Q2 2022. This is likely due to a decrease in the demand for apartments in Durham due to an influx in multifamily construction in the area.

#4 – San Jose, California

Even though San Jose, California, remains expensive for real estate, it is losing in terms of rental rate growth. The average one-bedroom apartment in the city costs $2,600 a month, which is a whopping -6.10% less than Q2 2022.

While this may not seem like a significant drop, it is when compared to other cities across the country with similar real estate.

#3 – Buffalo, New York

The average cost of a one-bedroom apartment in Buffalo, New York, was $1,060 a month, which is down -6.20% from Q2 2022 in terms of rent growth.

#2 – Baton Rouge, Louisiana

Rent growth has significantly slowed in Baton Rouge, Louisiana, with an average one-bedroom renting at $890 a month. This is down -6.30% from Q2 2022. However, we don’t suspect that this trend will continue for long.

Baton Rouge has a very diverse economy with a variety of industry sectors, including manufacturing, education, health care, entertainment, tourism, hospitality, and government.

With most industries except manufacturing adding new jobs this year, we expect Baton Rouge to attract fresh employees seeking more work and lower costs of living.

And, with such a wide variety of jobs available in Baton Rouge, the city has a diverse population with a strong mix of cultures and backgrounds.

#1 – Lincoln, Nebraska

Lincoln, Nebraska, is currently the city where rent growth has slowed down the most as of Q3 2022. The average one-bedroom now costs $900 a month, which is a notable -6.30% decrease in rent growth since Q2 2022.

What Does a Decrease in Rental Rate Growth Mean?

A decrease in rental rate growth means that the rate of increase in rent prices is slowing down. This could be caused by a number of factors, such as an increase in the availability of rental units or a decrease in demand from renters.

Whatever the cause, a slowdown in rent growth can be good news for tenants who are looking for affordable housing. In the short term, it could mean less profitability for landlords.

It’s important to note that some extraordinary factors have impacted rent rates in the past few months. A slight decrease could be interpreted as a normal market correction based on historical norms and seasonal conditions.

Should Commercial Real Estate Investors Avoid Buying in Markets With Slow Growth?

As an investor, you always want to be aware of market trends so you can make the best decisions for your portfolio. In general, you want to avoid markets where rent growth is slowing down, as this could indicate a future slowdown in the overall market.

However, there are some exceptions to this rule. For example, if you’re investing in multifamily real estate, you may be able to weather a slowdown better than other types of investors since people will always need a place to live.

This is especially true in an economy where the single-family housing market has grown too expensive for prospective homeowners, forcing those who wanted to originally own to rent instead.

Ultimately, it’s important to do your research and ensure you understand all risks before making any decisions.

How Does This Compare Nationally?

Rental prices across the nation are dropping significantly. This reversal of widespread increases in rental prices is fueled by several factors, including rising vacancies in some markets, a shift back toward more typical seasonal moving patterns, and fears of economic downturns.

With higher interest rates and inflation levels continuing to push potential tenants out of the marketplace for new single-family homes, there is still relatively strong competition among landlords for renters. This is still good news for commercial real estate investors who own multifamily assets.

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