US rent prices dropped slightly in August
Renters across the US saw some relief in August 2024, as rental prices dropped slightly compared to last year.
Nationwide rents decreased by $5, bringing the median rent down to $1,753, according to Realtor.com’s August Rental Report. However, while this signals an improvement in affordability overall, many major cities are still grappling with rental costs that far exceed what most households can comfortably afford.
The report highlighted a continued trend of rental affordability improving in many areas, yet rent still consumes more than 30% of household income in six large metro areas, including Miami, Los Angeles, and New York.
Renters catch break, but not everywhere
Nationwide, renters are spending less of their income on housing than they did a year ago. On average, Americans devoted 25.1% of their household income to rent in August, down from 25.9% in August 2023.
"One way to think about housing affordability is to use the 30% rule of thumb, where housing expenses including rent or mortgage, utilities and HOAs or other fees should not exceed more than 30% of your income," explained Danielle Hale, chief economist of Realtor.com.
"Amid easing rents and growing incomes, rental affordability improved in a majority of US major metros compared to last year, and crucially, typical asking rent is less than 30% of the typical household income nationwide.”
But this improvement is not felt equally across the country. In cities like Oklahoma City, Columbus, and Austin, renters fare better, spending well below the 30% income threshold. Oklahoma City, for example, has become the most affordable market, where the median rent is just $1,040, and renters spend only 18.2% of their income on housing.
Markets like Tampa, Nashville, and Charlotte have benefited from increased rental supply, which has helped to lower rents. For example, Tampa’s median rent dipped to $1,733, accounting for 29.9% of the average household income, a significant drop from last year when it exceeded 30%.
This surge in rental supply has played a crucial role in driving affordability in southern cities, where new construction has outpaced demand, offering some relief to renters.
Major cities straining renters’ budgets
While renters in the South are catching a break, some Midwest cities are seeing the opposite trend. Cities like St. Louis, Cincinnati, and Minneapolis have experienced rising rental costs that are making housing less affordable. In St. Louis, for instance, the share of income spent on rent rose to 21.7%, up 0.7 percentage points from last year.
“Housing affordability is still a challenge as rents are still considerably higher than before the pandemic and still above the 30% threshold in six of the metros Realtor.com examined," Hale said in the report.
Additionally, six metro areas continue to see rents gobble up a substantial portion of household income.
Miami topped the list as the least affordable rental market, with renters dedicating a staggering 40.8% of their income to housing costs. Other major cities like Los Angeles (38.7%), New York (38.1%), and San Diego (35%) are also seeing rents well above the recommended 30% threshold.
“While Miami saw one of the most significant improvements in affordability over the last year, with a 3.3 percentage point decrease in the rent-to-income ratio, it’s still the most expensive market for renters relative to income,” the report revealed.
Rent vs. homeownership
Even though renting has become more affordable in many parts of the country, it’s still a more attractive option compared to homeownership.
According to the report, buying a typical starter home with 0-2 bedrooms in August required 38.5% of a household’s income, much higher than the cost of renting.
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This significant gap continues to drive demand for rental properties, particularly in larger metro areas where the cost of purchasing a home remained out of reach for many.
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