Buyers priced out of owning their dream home in the suburbs have a solution — they're renting instead
A growing number of Americans have come to accept that they might not be able to afford to buy the idyllic suburban home of their dreams anytime soon—so instead, they are choosing to rent one.
In recent years, the supply of rental properties in suburbs surrounding many major metros has surged, driven by both new construction and changes in tenure—meaning that homes once occupied by owners are being rented out to tenants.
Realtor.com® senior economist Jake Krimmel analyzed data from the latest American Community Survey between 2018–23 and found that the rise in suburban rentals could be seen in metros that saw a boom in new construction, such as Austin, TX, Nashville, TN, and Denver, as well as in cities with low construction rates, among them Boston, Philadelphia, and Washington, DC.
7 The supply of rental properties in suburbs surrounding many major metros has surged, driven by both new construction and changes in tenure.
Allison – stock.adobe.com
Perhaps unsurprisingly, fast-growing metros saw dramatic increases in renter-occupied homes.
Bastrop County, TX, situated about 30 miles from downtown Austin, saw the number of rental properties surge by nearly 50% from 2018 to 2023. During the same period, nearby Williamson County added 46% more for-rent homes, followed by Hays County with 25% and Travis County with 20%.
Brad Pauly, an Austin broker and the owner of Pauly Presley Realty, tells Realtor.com that there are currently more renters than buyers in the local housing market.
'Because of the discrepancy between what it would cost to lease versus to buy, leasing has become a more attractive option financially,' he says.
7 Brad Pauly tells Realtor.com that there are currently more renters than buyers in the local housing market.
Realtor.com
Multiple factors are behind this shift, according to Pauly, including elevated mortgage rates in the high-6% range, which are keeping buyers on the sidelines, as well as the proliferation of rental properties that were bought for that specific purpose during the COVID-19 pandemic years.
Additionally, Pauly notes that a large number of homeowners in the suburbs had originally planned to sell, but ultimately opted to rent out their homes in light of the softening market conditions.
Krimmel confirms that the housing market analysis mirrors what Pauly has been seeing first-hand in Austin.
'In general, the suburbs have boomed during and after the pandemic, due in large part to people wanting more space and also because the large generation of millennials were beginning to settle down and start families,' he explains. 'With all this demand for the suburbs, we saw a lot of new-construction activity there.'
7 Multiple factors are behind this shift, including elevated mortgage rates in the high-6% range, which are keeping buyers on the sidelines.
Realtor.com
Nashville has seen a similar trend, with the number of rentals in Williamson County increasing 25% in five years. Meanwhile, Rutherford County and Davidson County saw upticks of 16% and 15%, respectively.
On the East Coast, where the construction pace is considerably slower and boosts in rentals come entirely through changes in tenure, the suburbs of Washington, DC, such as Prince George's County and Howard County, added between 11% and 12% of rental homes—while areas outside Boston, including Norfolk and Middlesex counties, saw smaller gains in the single digits.
'In short, demand for suburban living is up, and supply in many markets has met that demand,' notes Krimmel. 'But even in metros that didn't build a lot in response to this demand, we still see a rise in suburban rentership.'
While the majority of new construction is built for owners to live in themselves, a suburban construction boom also frees up existing homes for investors to buy and then rent out.
7 A large number of homeowners in the suburbs had originally planned to sell, but ultimately opted to rent out their homes in light of the softening market conditions.
Felix Mizioznikov – stock.adobe.com
Fueled by higher interest rates that have put homeownership out of reach for many, built-to-rent construction has been on the rise, especially in the suburbs in the South and the West.
Roughly 100,000 new build-to-rent properties are being developed across the U.S. at this time, following a strong year for the industry, which saw a record 39,000 rental single-family homes completed, according to a recent report from Point2Homes.com citing March data from the real estate research company Yardi Matrix.
'Between investor activity, build-to-rent, and high interest rates keeping would-be first-time homebuyers in a holding pattern, rentership has surged in the suburbs,' says Krimmel.
National rents continue on a downward trajectory
7 Roughly 100,000 new build-to-rent properties are being developed across the U.S. at this time.
Realtor.com
Looking at the overall state of the U.S. rental market, rental prices have been trending down nationally, with May marking the 22nd consecutive month of annual decreases, according to the May Rental Report from Realtor.com.
The median asking rent in the 50 largest metros was $1,705 per month, down 1.7%, or $29, year over year—but $5 higher than in April.
Notably, the typical rent declined in all size categories, from studios to two-bedroom units.
The Trump administration's anti-immigrant policies targeting international students—including a pause on new student visa interviews and the suspension of foreign student enrollment at prestigious institutions such as Harvard—are expected to cause rents to decrease in popular college cities like Boston, San Jose, CA, and Seattle.
7 The median asking rent in the 50 largest metros was $1,705 per month, down 1.7%, or $29, year over year—but $5 higher than in April.
bilanol – stock.adobe.com
'As international students are largely likely to rent, the anticipated decline in international student arrivals could reduce rental demand, increase vacancy rates, and put downward pressure on rents in these areas,' says Realtor.com economist Jiayi Xu.
San Jose has the highest share of foreign students, at 12.9%, followed by Miami, with 12.5%, and Boston, with 10.8%.
While international students make up only a small share of all renters, ranging from 0.2% to 2.1%, they tend to live in areas known for innovation with a high concentration of skilled professionals.
'A decline in international student enrollment could weaken the global and even domestic talent pipeline feeding into high-growth industries and potentially soften rental demand in these markets,' adds Xu.
DOGE purge leads to mixed results
7 San Jose has the highest share of foreign students, at 12.9%, followed by Miami, with 12.5%, and Boston, with 10.8%.
Realtor.com
Meanwhile, metro markets with high shares of federal workers continued to see divergent rental trends in May, with rents rising 1.3% in Washington, DC, but plunging 5.9% in San Diego, following staff purges overseen by the Department of Government Efficiency, which was previously headed by Tesla billionaire Elon Musk.
Other areas with strong federal worker presence, including Virginia Beach, VA, and Oklahoma City, OK, saw rents tick down 2.5% and 1%, respectively, while in Baltimore, rents inched up 0.3%.
'These divergent trends highlight that conflicting forces of federal job reductions and return-to-office mandates are some of several factors affecting the rental market in these areas,' notes Xu.
Meanwhile, President Donald Trump's 'Liberation Day' tariffs on imported steel and aluminum could drive up rents in cities that have recently seen the fastest growth in permitted multifamily construction, which is synonymous with rental properties, with Milwaukee, Oklahoma City, OK, Memphis, TN, Cleveland, and Columbus, OH, at risk of being hit the hardest.
In May, before Trump doubled the tariffs on aluminum and steel from 25% to 50%, four of these metros already saw modest annual rent declines, the biggest being in Memphis, at 3.3%. Only Columbus saw a slight 0.2% growth.
'These rising material costs are expected to place additional upward pressure on rents, as developers may slow construction or pass higher expenses on to tenants,' warns Xu.
Given that it takes just under 20 months to complete an apartment building, it might be some time before the added tariff costs are fully reflected in rents.
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