When you weigh your options of whether to buy a home or continue renting, how much you’ll pay each month is likely top of mind. Especially if you are a real estate investor and are currently renting out multiple investment properties. It is important to stay up to date on median rental prices in your area to ensure you are able to get the most out of each of your properties and increase your monthly cash flow.
According to recent data from the National Association of Realtors, median rental prices have reached their highest point ever recorded across the country. This study found rents rose by 8.1% from the same time last year. As it notes: “Beyond simply recovering to pre-pandemic levels, rents across the country are surging. Typically, rents fluctuate less than 1% from month to month. In May and June, rents increased by 3.0% and 3.2% from each month to the next.”
Rents Are Rising Sharply, and They Continue To Increase
Pandemic-era rental deals are gone. Prices are shooting up, and new data suggests they’ll keep climbing at a steady pace. The rally began in the housing market, where a buying frenzy dragged national inventory to historic lows and led prices to surge at their fastest rate in over 30 years. Now it’s spilling over into the rental market.
The difference in monthly housing costs when comparing renting and home buying today is significant, but many would-be homebuyers wonder about the future of rental prices. If we look to historical Census data as a reference, the median asking rent has risen consistently since 1988 (see graph below):
Provo-Orem Ranks in top 100 Metro Area Where Rents Changed The Most
In the Salt Lake City metro area, the median cost of rent went from $1,384 a month in March of 2020, when the pandemic first hit home here, to $1,451 a month one year later, a 4.8% increase, according to a new report by Stessa.com. The site ranked Salt Lake City metro area No. 64 out of 105 U.S. cities where rents changed the most since the beginning of the COVID-19 pandemic.
Despite a record-setting apartment “boom” that’s lasted for more than five years, rents across Wasatch Front counties have been increasing at an average of 5% to 7%, depending on the county, according to a report from the University of Utah’s Ken C. Gardner Policy Institute.
Meanwhile, vacancy rates stay low. In Salt Lake County, vacancy rates have gone from nearly 9% in 2009 and are lingering around 4.5%, according to a 2020 multifamily market report by CBRE. Vacancy rates are similar in Utah and Weber counties, and even lower in Davis County, at about 3.5%. Below you can see a current list of average monthly rent’s for various cities in Utah.
The rise in rent over time clearly shows one of the major advantages homeownership has over renting: stable housing costs. Renters face increasing costs every year. When you purchase your home, your mortgage rate is locked in for 30 years, meaning your monthly payment stays the same over time. That gives you peace of mind and predictability for many years ahead. As rents continue to rise across the country, renters should consider now may be the right time to buy.
If you are already a real estate investor with multiple rental properties now may be the time look into increasing rents. With record low vacancy rates in the state, there is little to no risk with raising rent to be on par with state averages.