Demand for Midwest apartments has become one of the strongest stories in US housing, even as the national rental market cools.
RentCafe, using data from its provider of apartment rental statistics, The Yardi Matrixlisted Cincinnati as a top apartment market to watch this hiring season. Minneapolis, Cleveland and Kansas City, Missouri, rounded out the top 10
Midwest momentum is expected to hold this year. One factor could be Midwesterners returning after traveling during the COVID-19 pandemic for warmer weather and jobs. Federal Reserve Bank of Cleveland Economists called it “boomerang migration” last year
Midwest metro markets have posted steady rent gains over the past few years. Those gains came at a time when rents were flat or declining in many Sun Belt metros. The epidemic-era wave of apartment building — now slowly sweeping through Sun Belt states — never reached the Midwest.
Construction in the Sun Belt has halted rent growth after reaching record levels. Developers added new offerings, which eased the pressure on rent
The stock market tells a similar story. Home sales in many areas of the Midwest are at a slow, slow pace. Builders have been adding new homes with more activity in the Sun Belt
However, the Midwest metro is expected to be among the hottest real estate markets this year
Industry analysts noticed a trend in the Midwest last year
Midwest apartment strength has entered industry discussions over the past year. Investors and analysts pointed to the consistent performance and flow of deals
“Everybody sleeps in Chicago, but Chicago has been a strong market,” said Jay Parsons, an apartment industry economist. Walker & Dunlop webcast last March.
Parsons said rents can rise even in markets with little or no growth. Most rental stock is 30 to 50 years old and expiring. That creates a shortage of affordable, modern units for renters willing to pay more
Chicago, Cincinnati, Minneapolis, St. Louis and Milwaukee posted growth of approximately 2% to 4% by 2025, according to the report. RealPage. Missing pre- and post-pandemic new apartment construction in the Sun Belt, new unit deliveries in 2025 fell below the Midwest’s 10-year average, according to industry reports.
With fewer competing leases for tenants, landlords rely less on approval. That has kept vacancy pressure soft and rental rolls tighter than high-end retail markets.
Returning home
While some analysts pointed to less growth in the Midwest, Cleveland Fed economists described a different pattern. They found that about a quarter to a third of the indigenous people who emigrated eventually returned to their places of origin. Many are returning to major Midwest metros, including Detroit, Cleveland, Cincinnati and Kansas City.
These returnees make up a small portion of the population at any given time. But they often arrive with strong credit, the necessary skills and built-in social networks, the report said. That could strengthen demand for rental properties, as many rent before deciding whether to buy.
Economists said the same forces shape the region’s attractiveness. The low cost of living and stable job opportunities can draw residents back to low-cost coastal markets
Affordable housing is relative
Apartments in Indianapolis, Columbus and Detroit rent for much less than in coastal or booming Southern metros. That gap has attracted renters who are fleeing expensive areas. It has also attracted investors who are looking for a stable yield rather than rapid growth
Even with affordable rental housing, affordability has become an issue for county lawmakers. A severe housing shortage is impacting the construction of affordable housing. Illinois Gov. JB Pritzker recently introduced legislation to lower housing costs through zoning changes. Indiana is pursuing similar changes this year
Both efforts are in line with measures that have gained momentum in Florida and Texas. Legislatures in those states have tried to reduce housing costs by lowering barriers to increased housing supply
The future of Midwest apartment demand
In many Midwest metros, a diverse economy continues to support steady absorption, even as mortgage rates rise for prospective home buyers. That keeps local tenants longer and gives rental property owners more pricing power than in overdeveloped markets.
For now, the combination of stable employment, tight construction and limited affordability positions the Midwest as the relative winner. As the national apartment market shifts into a slow, uneven phase, these markets seem set to hold their edge.
