America’s tenants have had it with record-high housing costs and rising expenditures for everything from food to energy. Just a few months ago, rental prices soared to all-time highs, but now the market has finally caught up with inflation, economic uncertainty, and declining demand.
In many areas of the US, rent increases are now beginning to slow down. This will end a years-long boom that has made housing unaffordable from coast to coast. Landlords are being forced to scale back significant increases: because tenant demand has abruptly decreased.
It’s a stark contrast to a few months ago, when people were vying for a few apartments, enrolling on waiting lists, or shelling out multiple application fees to get one house. The applicant pools have now diminished, and listings remain on the market for longer, especially in epidemic boom cities like Las Vegas and Phoenix. US household formation metrics are also now negative.
The most recent Nationwide Rent Report from Apartment List shows that the national median rental price decreased on a month-over-month basis by 0.2% in September. Rents will likely continue to decline in the upcoming months as the slow winter season gets underway, which is consistent with the typical pre-COVID seasonal tendency. In September, rentals increased by 7.6% over the previous year.
The market is still weakening from its scorching pace earlier in the year, although rental prices usually fall during the summer. According to NPR, which used data from Redfin, the median listing rent for an apartment in the US surpassed $2,000 per month for the first time as recently as June.
However, a different survey from Realtor.com published earlier this month revealed that the median rent in September – the amount tenants really paidâ€â€Âwas $1,759 per month. That was the smallest annual increase since June 2021, representing a 7.8% increase over the previous year. Additionally, September was the second of the past eight months when rental prices fell from one month to the next.
“Before we affirm a dramatic shift like the current cooling of the rental market, it’s especially crucial to establish consistency after more than a year of double-digit annual rent rises and nearly as many months of record-high rates.”
But September data shows that national rents have declined from their most recent all-time high recorded just two months ago, according to a statement from Realtor.com Chief Economist Danielle Hale.
She said, “We anticipate that rent growth will continue to decelerate in the coming months, partly due to the impact of inflation on tenants’ budgets.” When the “available rental inventory has started to reflect the recent uptick in multi-family new construction,” she continued, “it will be unlikely that rents will return to a more typical pre-COVID pace of growth before at least another year.”
The slowdown in rent growth is “being mirrored by further softening on the supply side of the market,” according to the Apartment List study. Its vacancy index now stands at 5.2% after nearly a year of modest gains from a low of 4.1% last November.
According to Apartment List, September rents decreased month over month in 69 of the 100 largest cities in the country. Rent growth in eight additional cities was flat month over month. The rent increase was less rapid during the first nine months of 2022 in 93 of the top 100 cities than it had been during the corresponding period in 2021.
According to Bloomberg, one factor restraining demand is that young people who may otherwise be seeking an apartment are choosing to stay with their parents instead. You can blame rents, which have increased so significantly that many individuals are now priced out of the market.
Some are also sharing spaces, as in the case of 18-year-old Coleby Hillenbrand, who shares an apartment with several other people. “I was able to round folks up and make rent inexpensive,” said Hillenbrand, who shares a small two-bedroom home south of Kansas City with his girlfriend and another couple. “People our age don’t make enough to pay their rent alone.”
According to a Zillow estimate, the average American would have needed to work more than 64 hours in September to cover the average monthly rent.
According to Jeff Tucker, a senior economist at Zillow, who spoke to Bloomberg, people in many markets could not afford rent. “The fact that fewer people will sign a lease shouldn’t surprise us.” Add additional inflationary difficulties, and the demand for rentals will decline.
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Mark, a lifelong Tulsan graduated from Westminster College, Fulton, Missouri with a Bachelor of Arts in Accounting. Mark served in the United States Army as a Captain in the 486th Civil Affairs BN. Broken Arrow, Oklahoma and retired in 1996. Mark is married to his high school sweetheart Jenny and has four beautiful children. Mark’s passion for his work, which includes over 20 years in the Financial Industry started as an Oklahoma State Bank Examiner. Mark examined banks throughout Oklahoma gaining a vast knowledge and experience on bank investments, small business and family investments. Mark’s experiences include being formally trained by UBS Wealth Management, a global investment firm where he served as a Financial Consultant specializing in Wealth Management for individuals & families. Mark is a licensed Series 24 and 28 General Securities Principal and an Introducing Broker Dealer Financial Operations Principal. Additionally, Mark is a Series 7 and 66 stockbroker and Investment Advisor focusing on market driven investments for individuals, businesses and their families. Mark specializes in providing financial knowledge, ideas, and solutions for federal employees, individuals, families and businesses. We serve as your advocate, and assist you in the design and implementation of financial strategies while providing the ideas to maximize your security and wealth. Our goal is to give you maximum control of your financial future. We provide the expertise to help you with personal issues such as: practical tax Ideas, risk management, investment solutions, and estate preservation. Additionally, we’ve counseled hundreds of employees on their transitions from careers in federal government, and private industry to their next life stage, whether that is retirement or a second career. We specialize in devising strategies that roll your TSP, 401(k), pension plan, to a suitable IRA to meet your objectives.
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