Home prices have skyrocketed over the last two years. Prices have continued to rise to record levels recently. This may change soon, as a surge in mortgage rates has made homes more expensive.
There were several causes of the run-up in home prices. One was historically low mortgage rates. Another was the new mobility among millions of Americans who could work from home and relocate to places they wanted to live rather than where they had to live to be next to offices.
As home prices rose, people turned to renting as an alternative. However, as a consequence, rental prices rose as well. According to real estate research firm CoStar Group, rents in the U.S. rose 11.3% last year. In contrast, over the previous five years, gross rents increased by 18.1%.
To determine the state with the highest rents, 24/7 Wall St. reviewed five-year estimates of median gross rent from the U.S. Census Bureau’s 2020 American Community Survey. The median gross rent across the United States is $1,096, and state values range from as low as $732 in West Virginia to as high as $1,651 in Hawaii.
In many of the states where rent costs are high, a higher share of housing units is occupied by renters, rather than homeowners. This is largely because these states have expensive housing markets as a whole, meaning residents are priced out of the possibility of owning a home and are forced to rent. Hawaii is the most expensive state in which to rent, with a median gross rent of $1,651. In Hawaii, nearly 40% of housing units are occupied by renters, above the 35.6% U.S. share and the fifth-highest share among states.
Generally, the states with the highest rents tend to have higher household incomes. However, even after accounting for those higher incomes, rent in these states is less affordable. In Hawaii and California, which rank first and second on this list, rent as a percentage of state median household income is second and fourth highest, respectively.
The most expensive state to rent a home is Hawaii. Here are the details:
> Median monthly rental cost: $1,651
> Share of income typically spent on rent: 32.5% (2nd highest)
> Rental occupied housing units: 39.7% (4th highest)
> Median home value: $636,400 (the highest)
Methodology: To determine the state with the highest rents, 24/7 Wall St. reviewed five-year estimates of median gross rent from the U.S. Census Bureau’s 2020 American Community Survey. States were ranked based on the median gross rent. To break ties, we used the median gross rent as a share of household income.
Additional information on median gross rent as a share of household income, share of households occupied by renters, and median home value are also five-year estimates from the 2020 ACS. Because the Census Bureau didn’t release one-year estimates for 2020 due to data collection issues caused by the COVID-19 pandemic, all ACS data are five-year estimates.
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