As the cost to buy a home continues to rise in the Midwest, real estate experts say the regional rental market offers affordable housing options and biding your time before buying may be the smart move in 2025.
This could be the year of the renter as interest rates, rising housing prices and inflation continue to challenge prospective homeowners.
While homeowner hopefuls may have to wait for a house in their price range, renters in the Midwest live in a region with the lowest rent in the U.S., which may sustain as the market fluctuates. This line? The federal government considers 12 states as "the Midwest."
Across the board, rental prices have ticked up, but according to Realtor.com, the Midwest still boasts the cheapest median rent at $1,450 a month. The median rent in the South is roughly $1,600 a month, while renters in the West pay roughly $1,950 and renters in the Northeast pay $2,450.
According to Realtor.com’s data, Kansas City had the highest rate of rent growth in Midwestern cities, at 3.1% in December. St. Louis saw a 1.3% increase in rent during the same period.
In December, at the state level, Nebraska saw the highest rate of growth in rent prices in the Midwest, at 10.8%, while Missouri saw rent growth of 6%.
Regardless of rates creeping up, however, the region is still relatively affordable.
“The Midwest is more affordable for renters than the other regions of the country, which probably doesn’t come as a huge surprise,” said Joel Berner, a senior economist with Realtor.com.
He added that the overall rate of rent increases in the region recently stalled and even fell by 1.4% in December.
“We’ve kind of reached a sort of a balance point where those prices have stopped increasing and they’ve stopped increasing at a place that’s lower than the national median,” Berner said.
Saving by renting
Daryl Fairweather, chief economist at Redfin.com, said the Midwest is the hottest housing market in the country.
“Everywhere else got really expensive during the pandemic, including the South, and now the Midwest is one of the only affordable regions left,” Fairweather said. “People are starting to realize that and buy homes there.”
According to a recent report from Redfin.com, Kansas City and St. Louis ranked in the top 15 U.S. metros with the highest increase in home prices between December 2023 and December 2024.
Kansas City saw home prices rise by 9% from 2023-2024 while St. Louis saw home prices rise by 8.5% from 2023 to 2024. That’s compared to a 6.3% increase in the median home price nationwide.
That same report noted that, collectively, home values in the Midwest are rising at a rate higher than in any other region in the country.
Berner said renters might currently have the upper hand on prospective buyers due to the housing market in the Midwest. The general affordability of rent makes for a good environment to save for a house, he added.
“In a lot of places right now, renting is easier to do,” Berner said. “If you can find a place like an affordable Midwestern market to live for a couple years, save up some cash and have a larger down payment when you do want to buy a home, that’s going to be really effective in this high mortgage rate environment.”
Record low interest and mortgage rates during the pandemic, combined with affordable housing in the Midwest, created a housing “craze” in the region. Berner said the Midwest is rebounding from that era, which makes for difficult terrain for homebuyers.
“The Midwest is picking up because of how affordable it is, and so that’s kind of a double-edged sword,” he said. “It’s affordable, so people want to buy it — and that drives prices up — and then it’s not affordable again.
According to the National Association of Realtors, the median age of first-time home buyers increased nationally from 35 to 38 in 2024. Berner said that’s a troubling sign for young first-time homebuyers.
The main factor driving that jump in age, Berner said, is a mixture of high interest rates and difficulty financing their purchases.
“First-time home buyers who don’t have equity built up in a previous home to sell and then transfer into their new purchase are having to finance large portions of their home purchase,” Berner said.
Rent now, buy later
Prospective buyers aren’t out of luck, however. According to Realtor.com data, housing inventory is trending toward pre-pandemic levels.
“That’s going to give buyers more options and more leverage to be able to go and make a purchase,” Berner said.
David Nall, a St. Louis realtor with Garcia Properties, said people who hope to buy a home should study the market and know what they’re looking for so they can strike when the right home becomes available.
“If something comes on that fits their criteria and it really excites them, it’s probably going to excite a lot of other buyers as well,” Nall said.
Nall said prospective buyers can take steps to make a competitive offer if they have the financing, including waiving contingencies on the sale, offering a larger deposit or being flexible on a closing date.
Renting while saving for that down payment could be helpful for some house hunters in the meantime.
“There are lots of nuances, in my opinion, to crafting a competitive offer,” he said. “It’s not just the price and it’s not just the closing date.”
The Midwest Newsroom is an investigative and enterprise journalism collaboration that includes Iowa Public Radio, KCUR, Nebraska Public Media, St. Louis Public Radio and NPR.