Seven of the ten most expensive rental markets had year over year price decreases.
The most expensive markets were San Francisco (one bedroom rent dropped last month to $3,200), New York (one bedroom rent declined to $2,840), Boston (one bedroom rent dropped to $2,350), San Jose (one bedroom rent remained flat at $2,300), Oakland (one bedroom rent dropped to $2,220), Washington DC, Los Angeles, Miami, Seattle, and San Diego.
At the same time, rents in smaller cities are increasing. Due to COVID, more people are able to work remotely so are moving away from expensive, high density, high crime locations to smaller cities and towns.
For investors, rents are an indication of value. Investors obtain a rate of return on their investment called “cap rate” that is roughly calculated as annual gross rent minus all expenses excluding interest, all divided by purchase price. As rents go down, perceived value goes down. Investors are likely to shun the expensive markets and to buy in areas in which rents are rising and in which the ratio of price versus rent is lower than in other markets. Investors are always chasing positive cash flow properties, which are properties in which rent exceeds mortgage, vacancy, taxes, insurance, and repairs.
Cities in which rents went up included Spokane, Henderson NV, Tulsa, Sacramento, Memphis, and Durham.
Cities in which rents went down included Providence RI, Washington DC, Syracuse, Irving TX, and Wichita KS.