Midwest apartment demand outpaces Sun Belt as rents remain firm

"Midwest apartment demand has quietly become one of the strongest stories in U.S. housing, even as the national rental market cooled. RentCafe, using data from its sister apartment rental analytics provider, Yardi Matrix, listed Cincinnati as the top apartment market to watch this rental season. Minneapolis, Cleveland and Kansas City, Missouri, ranked in the top 10. Midwest momentum is expected to hold up this year."

"One factor may be Midwesterners returning after leaving during the COVID-19 pandemic for warmer climates and jobs. Federal Reserve Bank of Cleveland economists dubbed it boomerang migration last year. Midwest metro markets have posted steady rent gains over the past couple of years. Those gains came while rents fell or flattened in many Sun Belt metros. A massive pandemic-era wave of apartment construction now slowly being absorbed in Sun Belt states never reached the Midwest."

"Everyone's always sleeping on Chicago, but Chicago's been a really strong market, Jay Parsons, an apartment industry economist, said on a Walker & Dunlop webcast last March. Parsons said rents can rise even in markets with little or no population growth. Much of the rental stock is 30 to 50 years old and becoming outdated. That creates a shortage of well-located, modern units for renters willing to pay more."

Midwest apartment demand has outperformed much of the U.S., with Cincinnati, Minneapolis, Cleveland and Kansas City among top markets. Midwestern metros posted steady rent gains while many Sun Belt rents flattened or fell as a pandemic-era construction wave in the Sun Belt added supply and eased rent pressure. Boomerang migration — Midwestern residents returning after pandemic relocations — contributed to demand. The for-sale market likewise saw slower home sales and less new-home building in the Midwest, leaving Midwest metros positioned to be among the hottest home-sales markets. Investors note consistent performance, older rental stock shortages, and opportunities for modern, well-located units.

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