Americans are finally starting to see the burning rental market begin to cool, after record growth.
A combination of strong demand, weak supply and high inflation kept rental prices under pressure nationwide, but for the first time in 20 months, asking rental prices saw negative growth, falling by 0.1% from July to August, according to CoStar Group.
CoStar Group, a provider of online property markets, information and analysis, said this indicated a “deteriorating rental market” in its report.
This is a welcome relief for tenants who have seen their rents rise while dealing with inflation.
Rent prices soared in the first half of 2022, reaching a national average of $2,495, according to HouseCanary’s National Rentals Report.
While rental prices continue to increase year over year, the pace of growth is slowing. Asking rents fell to 7.1% in August from 8.4% at the end of July, according to CoStar.
The cities that saw the fastest growth in rents in 2021 are now seeing the biggest declines.
Palm Beach saw the most dramatic growth slowdown, where asking rents fell from 30.6% in the fourth quarter of 2021 to 8.2% at the end of August, according to CoStar. Phoenix followed closely with year-over-year rents dropping to 5.2% in August from 21% at the end of 2021. Rents in Tampa, Fhave also seen and Las Vegas also fell to two numbers so far this year.
Yet nearly half of all renters in the United States pay 30% or more of their annual income in rent, according to a report by Harvard University’s Joint Center for Housing Studies.
Marissa DuBee recalls having “sticker shock” when looking for a rental this summer.
DuBee, a 30-year-old social media marketer, and her fiancé Troy, a commercial truck driver, were renting a fully furnished, 1,700-square-foot three-bedroom home in Greentown, Pennsylvania, for $1,250 a month. However, she told ABC News that their landlord decided to take advantage of the hot housing market this spring and sell the house, which meant they had to move into the basement of her mother’s house until later. so that they can find an affordable rental.
“It’s always hard to go back once you’ve been alone,” she said. “And we were very lucky and lucky enough that my mother let us live there with open arms.”
DuBee said they currently pay $1,300 per month for a much smaller rental in the same city; a single width mobile home with three bedrooms. She said the two were trying to save as much as they could for their November 2023 wedding.
“We’re both working as hard as we can to make ends meet and plan our dream wedding. It’s really hard, especially with the cost of everything just going up, but in the end, we know that. “everything will be worth it.”
Housing accounts for about a third of inflation. The consumer price index hit an annual rate of 8.3% in August, the highest in nearly 40 years, the Labor Department said. The average hourly wage rose 5.2% in August compared to a year ago.
With a rental of $4,000 a month, Grace Villiano, 22, thought she and her roommate would have plenty of options when looking for an apartment instead, what in Manhattan. What they found was intense competition and bidding wars for too few apartments.
“Every apartment that we would schedule for an open house would be sent under contract within 20 minutes of our contact with the property,” Villiano said. “We had people walking past us offering several thousand requests. It was honestly, overall, very frustrating that we felt we could barely get our foot in the door and ultimately had to accept an apartment without able to see it or maybe even see a floor plan.”
While rental prices are showing signs of stabilizing in some markets, rents in New York remain at an all-time high. This summer, the average monthly rent in Manhattan topped $5,000 for the first time, according to a report by real estate expert Miller Samuel.
A New York City property manager with more than 2,000 rental units in Manhattan said inflation is also impacting landlords. Speaking to ABC News on condition of anonymity, the property manager said: “We pay more for utilities like water and gas, more for maintenance and staff, which is the main reason for which rents have remained high.”
The property manager also said current rents in the city may seem artificially higher than they really are, as they’re compared to prices during the height of the pandemic, when many landlords were reducing rents and offering benefits. to attract tenants to big cities.
For many Americans, rising mortgage rates continue to complicate the question of whether to buy or rent, experts said. In some markets, mortgage payments are the highest on record relative to monthly rent.
According to the Mortgage Bankers Association, the median monthly mortgage payment was almost one and a half times the median monthly asking rent in the second quarter.
Analysts said this could have forced many people, especially first-time home buyers, to delay buying a home, adding further pressure on rental prices.
But there are reasons for optimism. Analysts said a record volume of apartment construction over the next year could help ease a supply shortage, which would help keep rental prices in check.
Rental growth for CoStar projects will continue to moderate over the next few months, ending the year up 6.2% over last year. Things are expected to slow further in 2023, when CoStar expects rents to increase by 4.9%.
Although tenants don’t have much control over rising prices, experts said renewing your current lease will likely give you the smallest rent increase, as renewal rates generally tend to be lower than rents offered to new tenants. They also recommend locking in a longer lease. – term lease to avoid higher annual rent increases.