Rising rents could suggest the homebuyer pool is about to get even bigger at a time when demand in the housing market is already far outpacing supply.
The national average monthly rent for all unit types hit $1,361 in January, a 2.8% increase from the same period last year, according to apartment listing website RentCafe. And with apartment rents growing in 89% of the nation's biggest cities this month, renters may be even more tempted by homeownership.
But there's a problem: owner-occupied housing inventory remains severely constrained, driving up home prices and holding back home sales. So while this potential influx of home buying demand would be welcomed by mortgage lenders, the opportunity isn't reaching its full potential.
Still, with rents and home prices both on the rise, consumers may find putting their housing dollars toward equity in a home more appealing than renting with no opportunity for a return on investment.
Year-over-year rents declined in only six of the 250 cities that RentCafe analyzed, with Lubbock, Texas, seeing the biggest decline, at 6.3%. The only large market to see a year-over-year decline was Brooklyn, N.Y.
Renters in New York City had enjoyed a two-year-long freeze on rent-stabilized units
, but that ended late last year. However, Brooklyn residents are now bracing for a lengthy shutdown of a subway line that serves as a main artery for connecting the borough to Manhattan. Repair work won't begin until 2019, but it may already be affecting the neighborhood's real estate market.
On the other hand, lenders should keep an eye on markets like the neighboring West Texas cities of Midland and Odessa have seen rents rise more than 30%, as rising oil prices have helped improve the local economy that's dominated by the energy sector.
Here's a look at the 12 housing markets with the largest year-over-year rent increases. The data is provided by RentCafe's sister company, Yardi Matrix, a commercial real estate and data platform.