2014 marks the fifth year in a row in which we’ve seen apartment rent prices rise across the board. Rents rose in all of the major metro areas, but 2014 saw the trend come to their city borders. Reis, Inc., a real estate research company, revealed in a recent report that overall rent prices rose an average of 3.6% in the nation, pushing the average lease rate per month to $1,124.38. The Wall Street Journal also reports that apartment vacancy last year sat at 4.2%, the lowest it has been in 15 years.
The Reis report also revealed that smaller cities across America actually outpaced major cities like New York and Chicago in terms of rent jumps. Denver, CO saw a 7.9% average jump while Charleston, SC witnessed a 5.5% jump and Raleigh, NC a 4.8% rise.
So what is causing this rise, especially among smaller cities? The Great Recession had many effects on the population, but none learned greater lessons from it than Millennials. As a result of the housing bubble bursting years ago, Millennials have increasingly moved to areas where the rent is cheaper to pursue their interests, thus began the gentrification of many inner city areas over the last decade. Now that the city has gotten expensive again in the major metro areas, Millennials are once again looking for cheaper areas to make a life for themselves, and have found smaller cities to fill the void.
Looking at real estate in Massachusetts, the light rail system extension known as the “T” Red Line brought about gentrification and higher rents in Somerville. Prior to the a station being built in the neighborhood in 1984, Dallas Square was crime-ridden and down-trodden; the train system brought in students and younger people who liked the easy access to Boston’s prestigious schools like MIT and Harvard, and so began the gentrification process. Today the city is planning on expanding its Green Line with six more stations, leaving many to wonder if and when rental prices may go up again.
This influx of people moving in (including retirees) to take advantage of the (at least momentary) low rents on smaller cities has caused vacancies to fill up fast and warrant landlords to value their properties higher, ultimately resulting in higher rent costs in places like Denver, Charleston, and Raleigh. However, Millennials aren’t the only reason for rental increases.
Many of these cities have also seen enormous job growth, attracting the attention of job seekers and filling up the residences in the area. The WSJ reports “In Denver, Camden registered a 6.5% revenue increase in the third quarter of last year from the comparable period a year earlier. The REIT notched a 6.7% increase in Austin in that time frame, and a 4% gain in Raleigh.”
Another reason for rental increases in smaller cities is that they simply have not kept up with the growing demand for housing the same way major metros have. While more and more housing projects are being built, most of that construction is happening in major cities that are used to the influx in population. City councils have no doubt taken notice of the trends in their cities and plan to build more housing to accommodate the growing demand.
Are you looking to relocate to a smaller city to catch the job growth wave? Here is a comprehensive list of choices for you to peruse through.