Zillow Says These Five Rental Markets Are Still Smoking Hot

Zillow’s monthly rental data offers a compelling overall view of the rental market. It shows that residential rental growth has plummeted from its post-pandemic highs. Despite stabilizing after pandemic highs, there are still a few markets that are increasing more than the norm, and the locations may surprise you.

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The Broad Strokes On The Rental Market

Zillow’s data put U.S. rent at $2,054 in June, up 0.5% month over month. This isn’t far off from the pre-pandemic change for this time of year, which is 0.6%. Rental activity tends to slow over the late spring and early summer and then heat up in late summer and early fall as people want to find a home before the school year begins. Rents are up about 3.5% year over year and nearly 33% since the pandemic, a number that has severely burdened many renters. Rents are up in 48 out of 50 markets. 

Single-family rentals continue to outpace multifamily. For homes, rents are 4.7% higher than last year, with a typical price of $2,288. Multifamily rents are just 2.7% higher than last year, with a typical rent of $1,906. One warning sign is the reliance on concessions. Zillow found that 33% of rentals used concessions to help close the contract. 

The Zillow Observed Rent Index shows that some more affordable markets are now experiencing larger-than-average rent increases. Let’s examine these top markets and if current residents are income-mortgage-ready, meaning that the payment in their market would not exceed 30% of income.

1. Hartford, CT — 7.8%

The capital of Connecticut has seen its population decline slightly in recent years. It has an estimated 119,669 residents. Owner occupancy is low in the area, just 25.6%. The median family income is $112,000. Home values are relatively low in the area. Zillow estimates the value to be ​​$176,089, far below national averages, after home values rose by 7.2% year over year. 

According to a report Zillow published last month, even with today's high interest rates, 18.1% of rental families in Hartford are mortgage- ready. Redfin's data shows that the median home price in Hartford has climbed by 25.1% over the past year, giving renters few options.

2. Cleveland, OH — 7.2%

Cleveland, Ohio, is quite a bit larger, with an estimated 362,656 residents, down 2.6% since 2020. The median family income is lower at $85,000, but 22.4% of residents are income-mortgage qualified, putting it in the top five of Zillow's list of markets with a high mortgage readiness ratio. Only 40.9% of the housing is owner-occupied. 

Zillow estimates that Cleveland’s home value is $113,340, up 10.8% year over year. The gap between value and sales price is far more modest in Cleveland. Redfin's median sale price is $130,000, up 18.2%, showing that the window of opportunity may also be closing here. People are on to Cleveland's charms. This year, it made Money.com's list of the top 50 places to live in the United States.

3. Louisville, KY- 6.8%

This city is famous for the Kentucky Derby, its long pathways along the Ohio River, and for being the birthplace of boxing legend Muhammad Ali. Louisville, Kentucky, and surrounding areas have a population of 622,981, down 1.4% since 2020. Over 60.4% of the housing in the area is owner-occupied. 

Louisville's family income is also $85,000; around 20% of the population is income-mortgage ready. The home values are higher here: $243,600, up 3.6% year over year per Zillow. The median sales price of $269,900 is up 11.7% year over year. 

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4. Providence, RI — 6.3%

Our fourth city takes us back to New England and Providence, Rhode Island. This university town has a small population of just 190,792 residents, although the Census Bureau estimates the county at 660,615. The population level has stayed steady, and 39.9% of homes are owner-occupied in the city, and 55.8% within the county. 

Home values are higher here, Zillow pegs the current home value at $397,536, up 11.2% year over year. And the sales climate is even more grim. The median sale price per Redfin clocks in at a blistering $501,000, up 19.3% year over year. With a median income of $104,000, Zillow estimates just 7.7% of the population is income-mortgage-ready. For many in this market, renting may be a better choice despite the increase. 

5. Milwaukee, WI — 5.7%
With the Republican National Convention in town, all eyes are on Milwaukee this week. Milwaukee's population is 561,385, down 2.9% from 2020. 

We are back in more reasonable territory when it comes to home prices. Zillow says the average home value is $210,407, up 9.2%. The median sale price isn't too far from that number, coming in at $215,000 per Redfin, an increase of 9.1% year over year. However, its lower median family income of $91,000 means only 14.4% are income-mortgage ready. 

Rent isn't the only reason to live in an area, but keeping an eye on rental affordability is key for tenants, homeowners and potential real estate investors. Smaller cities may look particularly tempting, with rental prices straining budgets in cities like Austin, Miami, New York, and Los Angeles. 

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