In a welcome development for renters across the United States, a recent Realtor.com report reveals that the median rent in May experienced its first annual decline in at least three years. The national median asking rent stood at $1,739, marking a slight increase from April but a 0.5% decrease compared to May 2022.
According to Danielle Hale, Chief Economist at Realtor.com, this decline in rents signifies a potential end to rental-driven inflation, even though it may take time for official measures to reflect this trend. The combination of falling rents, cooling inflation, and a robust job market brings good news for households.
While rents have been gradually decreasing since their peak in July 2022 ($1,777), they still remain nearly 25% higher than they were in 2019. The surge in rents began in 2021 as people returned to urban areas for in person work and school, leading to a lack of available housing and soaring rental prices. The situation was further exacerbated by the “pandemic pricing “phenomenon experienced in 2020.
Despite the overall positive trend for renters, some individuals who have stayed in their current rental properties for an extended period might experience sticker shock if they decide to move. Danielle Hale explains that even though market rents are declining, those who haven’t moved recently might face higher rent payments due to being below the current market rent level.
Regional variations in rent trends were observed in May, with the West andthe South recording year-over-year declines of 3% and 0.7% respectively. On the other hand, the Midwest and Northeast continued to experience rent increases.
The Midwest’s affordability and low unemployment rates contribute to rising rents in the region, while a strong labor market drives rental demand in the Northeast.
Notable metro areas with significant year-over-year rent increases include Columbus, Ohio (9.3%); St. Louis, Missouri (7.7%); and Cincinnati, Ohio (7.7%). In contrast, Las Vegas (-6%), the Riverside and San Bernardino area in California (-5.9%), and Phoenix (-5.7%) witnessed the largest year over-year rent declines.
Experts predict that rents will continue to soften throughout the remainder of this year and into the next, aided by an expected surge in supply. Danielle Hale highlights the historic levels of multifamily construction activity currently underway, which will contribute to easing rental prices.
It’s important to note that these rent declines may take time to be reflected in national inflation gauges, specifically the Consumer Price Index (CPI). As shelter, which includes rental leases and the implicit rental value of owner-occupied properties, carries significant weight in CPI calculations, changes in rents are not immediately captured due to infrequent data collection and infrequent rent changes in leases.
The downward trend in rents brings a sigh of relief for renters nationwide, signaling the possibility of more affordable housing options and easing financial burdens.
Written by:
Dana Sterling-Editor
