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The latest residential vacancy rate data from the U.S. Census Bureau for the St. Louis Metropolitan Statistical Area (MSA) shows that the rental vacancy rate for 2023 was an average of 7.73% and increase of over a percentage point from the previous year. As the chart below illustrates, the average St Louis rental vacancy rate for 2023 was the highest in four years.
St Louis MSA Rental Vacancy Rate 2015-2023
Data for St. Louis County is consistent with the report. Since the report covered only counties with a population of 1 million people or greater, St. Louis County was the sole county from our area included. The report highlights that in St. Louis County, MO, renting remains more affordable compared to owning. This reflects the national trend, with median three-bedroom rents requiring only 24% of average local wages compared to higher percentages for home ownership costs. It’s worth noting that the affordability gap between renting and owning in St. Louis County is much narrower than in many counties in the U.S., particularly coastal areas. Things may change soon though based upon trends shown. The report reveals that in 2024, median rents for three-bedroom homes have risen more than single-family home prices in a majority of counties. This indicates a shift in the rental market dynamics, emphasizing the growing challenge for renters in finding affordable housing. Rent vs. Wage Growth An alarming trend noted in the report is that median three-bedroom rents are increasing faster than average local wages in over half of the markets analyzed. This disparity is a crucial factor contributing to the affordability crisis, as it indicates that wage growth is not keeping pace with rising housing costs. Buying a Home: Long-Term Certainty vs. Short-Term Instability. For those who have been following my articles over the past few years, I hope you’ve realized that I don’t blindly advocate for homeownership. I recognize that owning a home isn’t the best choice for everyone. In many cases, renting a home or an apartment is a better fit. However, considering the details in this report, it’s clear why buying a home can be advantageous for those in a position to do so. It offers the long-term certainty of fixed costs, contrasting sharply with the volatility of the rental market. This contrast is especially pertinent in light of the report’s findings that rent increases are outstripping wage growth. Understanding Your Real Estate Options At MORE REALTORS®, we pride ourselves on having a team of some of the most skilled and professional real estate agents in the St. Louis area. Our agents are dedicated to providing informed guidance tailored to each individual’s needs. Whether you’re considering buying or leasing, we’re here to offer insights and assistance based on your unique situation. For more information about our agents and the services we offer, please visit morerealtors.com. Alternatively, you can contact me directly at Dennis@STLRE.com, and I’d be happy to connect you with one of our knowledgeable real estate professionals. As the infographic below illustrates (which is available exclusively from MORE, REALTORS®) the median price of a home in St Louis (the 5-county core market) has increased 112% since 2000, from $124,900 in 2000 to $265,000 in 2022. During the same time period, the median lease rate, or rental rate, for a St Louis home has increased by just 68%, moving from $955 in 2000 to $1,600 in 2022. Leasing a home is obviously a better deal, right? If we set aside the benefits (and responsibilities) of homeownership and the long-term investment aspects, simply looking at the monthly cost might lead us to the conclusion that renting a home in St. Louis could likely save us money compared to buying one. After all, if we just consider the fact that during the aforementioned 22-year period, the cost of buying a St. Louis home increased by nearly 65% more than the cost of leasing one, we would certainly lean towards that conclusion. However, if we account for interest rates, which impact the monthly cost of owning a home (assuming financing is involved), we find that the gap significantly narrows. This is because even though interest rates are higher now than they were just a year or two ago – in fact, roughly double – they are still lower than they were in 2000. Factoring in interest rates, the gap between buying and leasing narrows significantly. In 2000, interest rates for a 30-year fixed rate mortgage varied but averaged roughly 7.5%. In contrast, they were around 6% in 2022. As the infographic shows, when we take these rates into account to assess the monthly cost of owning a home, we observe that even though home prices have risen by 112% since 2000, the house payment on a median-priced home has only risen by 82%. While the increase in house payments at 82% is still greater than the 68% increase in leasing, the gap is much smaller. Once other benefits of homeownership are factored in, it becomes easier for many people to justify the additional cost of ownership. To clarify, I am not claiming that homeownership is for everyone or that leasing is inherently inferior. In fact, I’ve been one of those people who have consistently said that homeownership isn’t for everyone. For many individuals, based on factors like their likelihood of relocating, job and financial stability, money management skills, and others, leasing can be a better alternative. I am simply trying to highlight that the cost gap between the two options may not be as wide as it initially appears. Should I rent or buy a home in St Louis? This is a question St Louis REALTORS® are often asked, especially in the past few years while homes appeared to be increasing weekly, there were often more than a dozen offers on a listing and generally the market seemed out of control. Granted, some of that pandemonium has eased somewhat lately given the increase in interest rates and questions about the economy but the question still remains. While there are many non-financial reasons people choose to buy their own home or condo versus rent, we’ll just look at the cost today. Home prices increased at more than double the rate of rents… As the chart below, exclusively available from MORE, REALTORS®, shows, the median price of homes sold in St Louis during 2018 was $178,800 and increased to $240,000 in 2022 for an increase of over 34% during the 4-year period. The median rental rate of homes leased in St Louis during 2018 was $1,250 and increased to $1,450 in 2022 for an increase of 16% during the same 4-year period. During this 4-year period the rate at which the price of St Louis homes increased was more than double the rate at which the rental rates of St Louis homes increased. Factor in interest rates and the cost of home ownership increase and monthly cost of home ownership As the second chart below shows, mortgage interest rates during 2018 were in the mid-to upper 4’s and in the 6’s and even hit 7% during 2022 so this means in addition to home prices going up, payments went up even more. For the sake of this comparison, we’ll use 4.7% as the rate for 2018 and 6.7% for 2022. Therefore, the payment on a typical home in 2018 (principal and interest only based upon a 5% downpayment) would have been $881 per month and in 2022 increased by 67% to $1,471 per month. So, while the actual price of a home increased 34% during the period the monthly cost of it, in terms of house payment, increased at nearly double that rate, 67%. During the same period rents increased just 16% so the monthly cost of buying a home increased four-times as much. Continue reading “St Louis Home Prices Increased At Twice The Rate Of Rental Rates From 2018-2022“ A report just released by ATTOM data shows that St Louis home prices are rising at a rate significantly higher than the rate wages in St Louis are rising and St Louis rental rates are increasing at rates higher than home prices. As the chart below shows, during the past year, wages in the St Louis metro area increased 3.8% however, home prices in St Louis increased 7.9% and rental rates increased 11.2%. St Louis MSA – Housing Affordability
Data source: ATTOM Data – Copyright 2023 – all rights reserved, Guerrilla Brokers LLC
The St Louis MSA rental vacancy rate during the 1st quarter of 2021 was 6.4%, the highest rate since the 4th quarter of 2019, according to data recently released by the U.S. Census Bureau. During the 1st quarter of last year, the St Louis rental vacancy rate was 5.5%.. [xyz-ips snippet=”Foreclosures-For-Sale-and-Homes-For-Sale”] St Louis Rental Vacancy Rates – 2005 – Present(click on table for complete data from 2005 – present)
As a result of the impact of COVID-19 on the economy, as well as the impact of eviction moratoriums and the like, residential rental income for the apartment sector in the U.S. took a nose dive during the 2nd quarter of 2020. As the chart below shows, the total revenue for businesses from Rental and Leasing, dropped to $156 Billion during the 2nd quarter of last year, a decline of 16% from the quarter before when the total revenue was nearly $186 Billion. During the 3rd quarter however, rental revenue rebounded to nearly $180 Billion. [xyz-ips snippet=”Foreclosures-For-Sale-and-Homes-For-Sale”] Total Revenue For Real Estate and Rental and Leasing, Establishments Subject to Federal Income Tax – 2012 – Present(click on chart for Live Chart)
Individual landlords appear to be doing better… As the chart below shows, individual landlords appear to have fared a better than their corporate counterparts. Residential rental revenue for individuals fell over the summer months of last year to a low of $791 Billion in June which was a decline of about 1.6% from March 2020 when the rental revenue was $804 Billion. In November, the rental revenue grew to $818.7 Billion which represents the highest level ever. Rental Income of Individuals – 2000 – Present(click on chart for Live Chart)
[xyz-ips snippet=”Foreclosures-For-Sale-and-Homes-For-Sale”] The St Louis MSA rental vacancy rate during the 2nd quarter of 2020 was 4.4%, the lowest rate in over 15 years, according to data recently released by the U.S. Census Bureau. During the 2nd quarter of last year, the St Louis rental vacancy rate was 7.6%.. [xyz-ips snippet=”Foreclosures-For-Sale-and-Homes-For-Sale”] St Louis Rental Vacancy Rates – 2005 – Present(click on table for complete data from 2005 – present)”
The St Louis MSA rental vacancy rate during the 3rd quarter of this year was 10.6%, an increase from 7.6% the prior quarter and the highest rate since the 1st quarter of 2016 when the rate was 12.2%, according to data recently released by the U.S. Census Bureau. Last year, the median rental vacancy rate for the St Louis MSA for the year was 6.8%, a 13 year low. [xyz-ips snippet=”Foreclosures-For-Sale-and-Homes-For-Sale”] St Louis Rental Vacancy Rates – 2016 – Present(click on table for complete data from 2005 – present)
The St Louis MSA rental vacancy rate during the 1st quarter of this year was 8.1%, an increase from 6.6% the prior quarter, according to data recently released by the U.S. Census Bureau. Given that for 2018 the median rental vacancy rate of 6.8% in the St Louis MSA was a 13 year low, it’s not surprising we may see an uptick in vacancies. As the table below shows, the rental vacancy rate for the St Louis MSA for the first quarter of 2018 was 9.6% and then fell to 5.6% during the 2nd quarter so perhaps we’ll see a repeat of that this year as well but time will tell. [xyz-ips snippet=”Foreclosures-For-Sale-and-Homes-For-Sale”] St Louis Rental Vacancy Rates – 2016 – Present(click on table for complete data from 2005 – present)
The median rental vacancy rate for the St Louis metro area during 2018 was 6.8%, according to data recently released by the U.S. Census Bureau. This rate marks the lowest annual median rental vacancy rate for St Louis since the U.S. Census Bureau’s reports which began in 2005. As the table below shows, the vacancy rate for the 4th quarter of 2018 was 6.6%, down from 6.9% the quarter before and down from 9.2% a year ago. [xyz-ips snippet=”Foreclosures-For-Sale-and-Homes-For-Sale”] St Louis Rental Vacancy Rates
The vacancy rate for rentals in St Louis during the third quarter of this year was 9.8%, significantly lower than the median vacancy rate of 11.5% for that quarter since 2004. The year to date median vacancy rate for 2017, through the first 3 quarters, is 8.1% which is tied with last years rate, the lowest in more than a decade. So it’s a good time to be a landlord in St Louis! Rental Vacancy Rates In The St Louis Metro Area – 2015 – 2017(click table below for complete data going back to 2005 as well as rental rates)
Investors that rental property may find their best returns, relative to the price of the homes they buy, in the City of St Louis, according to some county-level rental data compiled by MORE, REALTORS. As the tables below illustrate, over the past 12 months the median price of homes sold in the City of St Louis was $106.57 per square foot and the median annualized price per foot homes lease for was $11.04 which works out to a gross annual return on investment of 10.4% in the City of St Louis, the highest of the four St Louis area counties we looked at. The next best return is found in Jefferson County with a 9.8% return, followed by St Charles County at 9.3% and finally, St Louis County, at 9.1%. Data limitations… There is an excellent source of very accurate market data available with regard to prices of homes sold, that being the REALTOR MLS which is where our sold data comes from. One of the reasons this data is so accurate is because the lions share of homes sold in St Louis are done through REALTORS and the data that is reported on those sales to the MLS is subject to strict guidelines and rules to insure accuracy. When it comes to rental and lease data however, the data is much harder to assimilate. This is because the majority of rentals are leased without the assistance of REALTORS and therefore the lease data does not make it’s way to the MLS and there really is no other reputable data source available for it. When it comes to rental data for larger apartment complexes and the like, there is such data available, but not for single family homes. Therefore, we have worked to produce rental data from the leases that are handled by REALTORS. As you can see from the tables below, the number of leases reported in the MLS is much smaller than sales (1,283 vs 13,330 for St Louis County for example) however, there are enough reported I believe to make the data statistically significant. We can drill it down more… We can drill down the data to a more local level, such as at the school district, city or zip level, and do this for our investor clients, but what I’ve compiled here gives an overall view of the market at the county level. Another thing I suggest investors evaluate as well before investing their money, is the appreciation rate of homes in that area. This is data we also compile and, when you put the rental return rate data next to the price appreciation data you get a pretty good picture of the areas that make the most overall sense to invest in. Search St Louis Homes For Sale HERE The rental vacancy rate in the St Louis MSA the U.S. during the third quarter of this year rose to 9.5 percent from 5.5 percent the prior quarter, according to the latest data released by the U.S. Census Bureau. It is worth noting though that the 5.5 percent vacancy rate seen during 2nd quarter was, as the historical table below shows, the lowest quarterly vacancy rate for the St Louis MSA in well over a decade and 9.5 percent for the 3rd quarter of 2016 is still much lower than the 13.9 percent vacancy rate we saw for St Louis during the 3rd quarter of last year.
Search St Louis Homes For Sale HERE The city of St Louis is one of the “Top 17 Single Family Rental Millennial Meccas“, according to a report just released by Attom Data Solutions. As the interactive info graphic below shows, St Louis joins the likes of Baltimore Maryland, Milwaukee Wisconsin and El Paso Texas, along with others, as a place that is ripe for investors to rent homes to millennials. For the report, millennial were defined as people born between 1979 and 1993. According to the report, investors that purchased rental homes in the city of St Louis during the first half of 2016 saw a gross rental yield of 12%, nearly 50% higher than the national average of 8.7%. In addition, millennials make up nearly a third of the population of the city of St Louis (29.3%) and 29.8% of the city is rental property, making for a solid rental market. On the downside, the average wages in the city of St Louis is down 2% from last year. Search St Louis Homes For Sale HERE Yesterday, St. Louis County Circuit Court Judge Gloria Reno granted a temporary restraining order against St Louis County to stop implementation of their recently adopted rental licensing ordinance. This is a huge victory for landlords, and property owners in general, as the new ordinance, as I wrote about previously, trampled property rights in many ways. In response to the passage of the landlord licensing ordinance, the St Louis Association of REALTORS® file a lawsuit against St Louis County on December 29, 2015 in an effort to stop the legislation. Hopefully, the temporary restraining order will be become a permanent injunction by the time the case comes to a close. Search St Louis Homes For Sale HERE Find Your Home’s Value Online NOW!
Last April I wrote an article about a bill in St Louis County introduced by Councilman Michael O’Mara which me, and a whole lot of other people and groups with interest in preserving private property rights, thought would trample on those rights. Fortunately, as I later reported, the St Louis County Council chose not to move forward with the bill at that time. However, St Louis County Councilman Michael O’Mara is back at it with a new proposed ordinance, Bill No. 204, which is pretty much the same as last years version. St Louis County Bill No. 204 (known as the “Residential Rental Property Licensing Code“), like the similar Bill No. 73 last year, has met resistance again by people and organizations that feel the proposed legislation violates private property rights of property owners and may even be discriminatory. In a letter to Chairman Pat Dolan, and the members of the St louis County Council, Willie Jordan, Executive Director, and Zachary Schmook, Managing Attorney, for the Metropolitan St Louis Equal Housing & Opportunity Council (EHOC) stated the proposed bill “will have substantial negative, and potentially discriminatory, effects for tenants and vulnerable populations in St Louis County.” The EHOC letter goes on to cite six areas of major concern they have with the bill, many of which are the same, or similar, concerns I expressed last year in my article written when the legislation surfaced the first time. Click Here to read the current version of the proposed Residential Rental Property Licensing Code If you would like to voice your opinion on this bill, I would suggest contacting the bills sponsor, St Louis County Councilman Michael O’Mara as soon as possible. You can contact him through the St Louis County Council website here or you can email him at MOmara@stlouisco.com or call him at 314.615.5439.
Which St Louis County Council members ARE and ARE NOT supporting this legislation? A the August 25, 2015 meeting of the St Louis County Council a vote was taken to “prefect” the bill and four of the council members voted in favor of this legislation and 3 against it. The members are listed below: Voted in favor of this legislation:
Voted against this legislation;
The rental vacancy rate in the U.S. during the second quarter of this year was 6.8 percent, the lowest level in over 10 years, according to data just released by the U.S. Census Bureau. This was a decline of over 9 percent (9.33%) from the 2nd quarter of 2014 when the rental vacancy rate was 7.5% and is the lowest level the rental vacancy rate has been at in over 10 years. As the chart and table below shows, the U.S. homeowner vacancy rate also declined during the 2nd quarter of this year to 1.8 percent which ties the lowest level the homeowner vacancy rate has been at in over 10 years as well. St Louis Rental Vacancy Rate Increases During 2nd Quarter- As the table below shows, rental vacancies in St Louis increased slightly during 2nd quarter rising to 8.7 percent from 8.6 percent the previous quarter. Search St Louis Homes For Sale HERE St Louis Rental Vacancies remain at historically low levels in spite of a slight increase in the first quarter of this year to 8.6% from 8.5% in the 4th quarter of 2014. The St Louis vacancy rate for first quarter of 2015 was also up significantly from the first quarter of 2014 when the vacancy rate for St Louis stood at just 7.2% although, as the table below shows, we have to remember that was the lowest vacancy rate we had seen in over 10 years. On a national level, the rental vacancy rate has declined as well, down to 7.1% for the 1st quarter of 2015, down from 8.3% for the 1st quarter of 2014. As the chart below illustrates, all four regions in the U.S. have seen a decline in rental vacancy rates from the 1st quarter of 2014 to the same quarter in 2015. This, coupled with the facts that St Louis has a higher vacancy rate for 1st quarter 2015 than that of the region, as well as has seen an increase in rate from a year ago while the region saw a decline, may be a warning sign that the St Louis market, while performing well, is not keeping up with the region and the nation. Search St Louis Homes For Sale HERE The rental vacancy rate in the U.S. was at 7.5% for the 2nd quarter of 2014, down from 8.3% the quarter before and at the lowest level in 20 years, according to data just released by the U.S. Census Bureau. The U.S. rental vacancy rate has not been this low since the 4th quarter of 1994 when the rate was 7.4%. Here in the Midwest region of the U.S., the rental vacancy rate was 7.5% during the 2nd quarter of 2014, the lowest rate in 16 years! The last time the Midwest Region of the U.S. saw rental vacancy rates as low as this was back in the 2nd quarter of 1998 when the vacancy rate fell to 7.3%. Perhaps it’s time to expand your rental portfolio or, begin building your portfolio? I’ll begin with a disclaimer. I realize this is a VERY subjective topic and there are about a hundred different criteria one may use to determine the best area to invest in rental property however, having said that, I attempted to do a broad brush analysis from 30,000 feet. I decided to look at which area, in general, offers the best return on investment when it comes to rental property. For the sake of my analysis, I looked at single family homes as rental properties since they are the most common investment by individual investors. To determine the best rate of return I looked at the median rent for the area as well as median vacancy rate of rentals and median home price. I then determined a rent/value ratio and the area with the highest ratio determines the area with the best potential return on investment. In computing the ratio I multiplied the median rent by 12 to get the annual rate, then reduced that amount by the vacancy rate and divided the result into the median property value. As the table below shows, the city of St Louis came out on top with the highest rent to value ratio, 6.48% followed by St Louis County with a 5.45%. Foreclosure Properties For Sale – Click HERE Last month I wrote an article about a residential rental property licensing ordinance that was proposed in St Louis County by Councilman Michael O’Mara which I felt was a bad piece of legislation and an egregious violation of the private property rights of property owners. I heard from many readers that felt the same way I did and in fact, many of you turned out at the County Council meeting earlier this week to voice your opposition to the bill. I’m happy to say that the ordinance, which was on the agenda to be perfected, was in fact not voted upon by the council and therefore did not become law, yet. Hopefully, the outcry of opposition from the public as well as from organizations such as the St Louis Association of REALTORS and the Metropolitan St. Louis Equal Housing Opportunity Council, has convinced the members of the council to no longer pursue passage of bill 73. See below for public comments that were made at the council meeting in opposition to the ordinance, as recorded in the St Louis County Council journal for the meeting of April. A residential rental property licensing ordinance has been proposed in St Louis County by Councilman Michael O’Mara which would prohibit an owner of residential property in unincorporated St. Louis County from renting or leasing their property without first paying a fee and obtaining a residential rental license. The bill, which has been kept relatively quiet and is impossible to find on the website for the St Louis County Council other than listed on the agenda, will most likely be passed at the meeting of the St Louis County Council tomorrow evening. While there are several municipalities in the St Louis area that currently require some sort of licensing or registration of rental property, and the issue of whether that is an infringement of property rights or not, is a topic I’m not going to address today. Instead, I will just focus on some of the things in this proposed legislation that I feel, in my humble opinion, are egregious violations of property owner’s private property rights. The bill, a draft of which can be read here, is bad in many ways, however below are the parts that violate private property rights the most. followed by my comments on each section: The St Louis rental vacancy rate for the 4th quarter of 2013 was 10.1 percent, the lowest rate since the 3rd quarter of 2012 when the rate was 8.2 percent, according to the latest dates just released by the Census Bureau. See the table below for quarterly vacancy rates from 2010 through 2013. The St Louis rental vacancy rate dropped to the lowest level of 2013 in the 3rd quarter coming in at 13.1 percent for the St. Louis metro area, according to the latest data available from the U.S. Census Bureau. This year started off with a vacancy rate of 15.6 percent for the first quarter, the same rate 2012 started out with as well, however, in 2012 the vacancy rate fell to just 8.2 percent during the 3rd quarter. Due to holidays and weather, the 4th quarter usually sees a significant increase in vacancy rates from the 3rd quarter so we could easily see the highest vacancy rates next quarter we have seen in years if the trend continues. See the table below for quarterly vacancy rates from 2011 through 2013.
St. Charles county is a “hidden gem” for real estate investors wishing to buy rental property, according to RealtyTrac’s newly published “List of Top 25 Hidden Gem Single Family Rental Markets“. St. Charles County was the only Missouri county that made the list and it came in at 21 on the list with a gross yield on rental property of 9.4 percent. The gross yield is determined by taking the annual median rent for a county and divide it by the median price of home in that county. In the case of St Charles county, the median home price is $158,000 and the median rent is $1,232/month, or $14,784 for the year, resulting in a gross yield of 9.4%. At the top of the list is Wichita County, Texas with a gross yield of 13.4%. See the infographic below for all counties in the top 25 list.
Continue reading “Demand for rental property likely to increase over next two decades“
“There are good opportunities for investors in every one of the top 100 markets,” said HomeVestors’ co-president, David Hicks. “But investors would be wise to take into account other dynamics for the ideal timing to enter the market.” Hicks sites job growth as a key indicator of a market prime for investment. “Higher job growth rates normally indicate a stronger market for rentals,” he said. “Strong growth rates and higher risk-return premiums usually point to the best markets to invest in now.” Continue reading “St Louis makes list of 100 best places to invest in rental property“
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Today, ATTOM released its ‘2024 Rental Affordability Report,’ presenting a comprehensive analysis of the current state of home rental and ownership in the United States. The report indicates that renting a median three-bedroom home is more affordable than owning a similarly-sized property in nearly 90% of the U.S. markets. This trend continues despite rents growing faster than home prices. A significant finding for our industry is that both renting and owning pose substantial financial burdens on average workers, consuming over a third of their wages in most county-level housing markets.
If you have tried to buy a rental property lately in St. Louis then you have discovered you are not alone and the competition for good rental property is quite intense. The reason is simple, experienced investors as well as new ones see real estate as a safe investment and, in many ways, a much better alternative to other investments. Part of the reason for this is the demand for rental housing, brought on as a result of many former homeowners that have been forced, or have chosen, to rent instead of own and “would-be” homeowners that are unable to meet tougher requirements for mortgages thereby forced to remain tenants. According to information just released by the Bipartisan Policy Center, the demand for rental housing is not going to subside anytime soon as five to six million new renter households are expected to form in the next ten years alone.
St Louis made the list of the “Best 100 U.S. Markets to Invest in Rental Property“, developed by HomeVestors and Local Market Monitor, coming in right in the middle at number 50. Las Vegas was in the number 1 slot and California was the star of the show with 12 metros on the list