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Rent Growth Sees "Smallest Increase In Years"

Jan 21, 2025
Neighborhood of rental homes
Associate Editor

Single-family home rents barely grow in 2024, up only 0.8%

As home prices and mortgage rates remain high, creating significant affordability challenges, there’s also less incentive for renters to make the transition to home ownership. Nationally, average single-family rent growth slowed to roughly 0.8% in 2024, “the smallest increase in years,” according to a new report from Rentometer. 

The report focuses on prices for three-bedroom single-family homes in nearly 860 cities across the U.S. The average single-family home rent was $2,357, and vacancy rates reached 6% in the third quarter of 2024 – the highest level in 26 quarters – putting downward pressure on rents.

Rentometer noted the apartment market "has suffered due to a glut of new units coming to market," and that those dynamics have also begun to impact single-family rents. The 6% vacancy rates have not been seen since the first quarter of 2018, according to the report.

The 0.8% rent increase last year is a steep drop in rent growth compared to about 7.1% year-over-year growth in 2022 and about 4% year-over-year growth in 2023. 

“The rental market is undergoing a noticeable shift, as both apartment rents and the single-family rental segment – which houses 14 million Americans and has outperformed apartment rents over the past couple of years – experience a marked slowdown,” the report notes. 

Rentometer average yearly rent growth for single-family rentals in the U.S.

The Rentometer report comes amid signs of sharp declines in real estate investor optimism. The Winter 2024 RCN Capital/CJ Patrick Company Investor Sentiment Index for the fourth quarter of 2024 dropped 27 points to 97, its lowest point in a year.

Only slightly more than a third (35%) of real estate investors surveyed to produce that index said they believe the market is better now than it was a year ago, compared to more than two-thirds, (68%) in the third quarter of 2024. Real estate investors who said they believe market conditions have become worse nearly doubled from 13% in the third quarter to 25% in the fourth quarter.

More than half of real estate investors surveyed pointed to the high cost of financing as the biggest challenge they are facing. And nearly 70% of those surveyed said that insurance costs influence their investment decisions.

The report from Rentometer also found some significant regional rent disparities. For example, Midwest rents grew the fastest at +5.26% last year, while those in the Southwest actually saw a slight decline by -0.09%. Meanwhile, rent declines in the Sun Belt, including in Austin, Texas, and Tampa, Florida, highlight the influence of build-to-rent developments, though Rentometer said it expects that trend “may not last.”

In terms of affordability, the report found rents in Toledo, Ohio averaged $1,217, and Detroit, Michigan, averaged $1,308, offering some of the lowest rents among large cities. 

On the other end of the affordability spectrum, California cities dominated high-cost rent rankings. Also, reflecting demand in affluent and tech-driven areas, the report notes that the average rent in Cambridge, Massachusetts was $5,687 and in Newport Beach, California was $7,316.

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Associate Editor
Published
Jan 21, 2025
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