U.S. Asking Rents Rise: Midwest Leads with 5.3% Increase as Supply Lags

The U.S. rental market is experiencing a steady uptick, with the national median asking rent reaching $1,987 in March, a 0.8% year-over-year increase. This marks the third consecutive monthly gain. The most significant growth is occurring in the Midwest, where rents hit a record high with a 5.3% annual jump, largely due to a more constrained supply of new apartments compared to other regions. While high housing costs continue to challenge Americans, the pace of rent growth has stabilized, offering renters more predictability than during the pandemic's volatile swings.

Why Are Rents Increasing Again?

After a period of cooling in 2023, the national rental market is seeing a gradual resurgence. The primary drivers are persistently high mortgage rates and a continued shortage of affordable housing for sale. With the average 30-year fixed mortgage rate at 6.82%, many potential homebuyers are delaying their purchases because monthly mortgage payments are near a record high. This dynamic bolsters demand for rental properties, putting upward pressure on rents. While the median asking rent is still 3.3% below the August 2022 peak of $2,054, the consistent recent increases indicate a tightening market.

What’s Driving the 5.3% Rent Surge in the Midwest?

The Midwest is the standout region, with its median asking rent rising 5.3% year-over-year to a record $1,456. This growth significantly outpaces other areas. The Northeast saw a 3.8% increase to $2,504, while the South was flat (+0.3% to $1,656) and the West experienced a slight decline (-0.7% to $2,365).

This disparity is largely attributed to regional differences in housing supply. The South and West have experienced a substantial construction boom in recent years, leading to a higher number of new apartment units entering the market. This influx gives renters more options and forces landlords to compete, limiting their ability to raise rents aggressively. In contrast, the Midwest and Northeast have not seen the same level of new construction. Fewer new units mean lower vacancy rates and more competition among renters, which makes it easier for property owners to increase prices.

Additionally, the Midwest's relative affordability compared to coastal regions helps sustain demand, especially at a time when housing budgets are strained.

How Do Mortgage Rates Impact Rental Demand?

Elevated mortgage rates have a direct and powerful impact on the rental market. When mortgage rates are high, the cost of homeownership increases. For many, this prices them out of the market entirely, forcing them to remain in the rental sector for longer. This phenomenon, based on our experience assessment, creates a pool of pent-up rental demand. Even though rates have come down from a 23-year high of nearly 8% in October, they are still more than double the pandemic-era low of 2.65%. As long as the barrier to homeownership remains high, a steady stream of demand for rentals will likely continue, supporting rent prices.

What Is the Outlook for Rent Prices?

The good news for renters is that the era of extreme, double-digit rent growth appears to be over for now. Year-over-year rent growth has remained below 3% since the start of 2023, a stark contrast to the 17.7% surge seen in 2022. This shift towards moderate and more predictable rent growth is largely due to a high volume of new apartment supply. The number of apartments under construction remains near a record high, meaning many new units are still in the pipeline. This incoming supply is expected to act as a buffer, preventing rents from increasing dramatically in the near future.

An industry professional notes that the economic environment has changed. Property owners may find it more difficult to impose large rent hikes as renters themselves face budget constraints.

In summary, for those navigating the current rental market, key considerations include:

• The Midwest offers less price growth volatility but is now experiencing the fastest rising rents due to limited new supply.
• High mortgage rates are likely to sustain strong rental demand, keeping upward pressure on prices.
• The influx of new apartment construction should help moderate future rent increases, providing a more stable outlook compared to recent years.

Note: Data reflects the median asking price for new leases on apartments, single-family homes, condos, and townhouses.