Rental Rates Cooling In 2023 As Midwest Gains On The Sun Belt

Apartment rental rates across the U.S. are poised to grow at a notably slower rate in 2023 following a national median rent increase of 3.8% in 2022, with bargaining power expected to shift — albeit slightly — back into the hands of renters.

Rents across 90 of the country’s largest 100 cities dropped in December, according to Apartment List’s first National Rent Report for 2023. Rent growth in 2022 was among the fastest tracked by Apartment List since 2017.

Meanwhile, it is getting easier to find an apartment, with the national vacancy rate increasing to 5.9%. 

While the Sun Belt was the rental market darling of 2020 and 2021, experiencing unprecedented growth during the peak years of the pandemic, the report also found that the Midwest is fast becoming a major region, with Indianapolis, St. Louis and Oklahoma City becoming the top three cities for growth over the past six months, according to the report. 

Prices in Indianapolis rose by 7.4% year-over-year, and the report suggests that due to the nearly 40% rent growth across cities like Tampa, Florida, and Tuscon, Arizona, the Midwest’s position as a still-affordable region may lead to more attention in the coming year. 

However, because of nationwide rent cooldowns, even those Midwest metros are likely to experience modest rent growth compared to 2021. Markets in the Sun Belt have likewise hit a growth peak, while metros like the San Francisco Bay Area are still recovering, with rents declining by 1.2% in December.

San Francisco and San Jose were the only two large metros where median rent is cheaper now than it was at the onset of the pandemic.