Tags: rent | inflation | housing costs

Rents Decrease for First Time Since 2008

Rents Decrease for First Time Since 2008

By    |   Wednesday, 14 June 2023 11:26 AM EDT

After being hit with double-digit increases in the past three years, renters are finally catching a break, with Redfin data showing rents declining 0.6% in May.

That year-over-year decrease is the first time rents have appreciably decreased since the 2008 financial crisis, The Wall Street Journal reports, although rents did dip briefly in 2020 at the very start of the coronavirus outbreak.

CoStar Group and RealPage data show new lease asking rents for apartments and single-family homes rising by just under 2% in the 12 months ending in May—the largest deceleration in recent years.

Nationally, rents have increased 25% in the past two years. In some markets, such as Miami and Riverside, Calif., rents have soared by 35% in the past three years.

Welcome Correction

“There’s certainly a correction taking place,” says Rob Warnock, a researcher at rental website Apartment List, which reports rents rising just under 1% for the trailing 12 months ending in May.

Real estate experts say the decline in rent might have even registered higher if the data stripped out lease renewals, which comprise a large portion of the rental housing market.

Since housing costs are such a big portion of people’s expenses—and the biggest component of the consumer price index (CPI)—a decline in rents would help the Federal Reserve’s fight against inflation as well as family budgets.

The shelter portion of the CPI rose 0.6% in May and 8% in the past year.

The decline in rent mirrors price declines in the housing market. Nationally, the median existing home price fell 1.7% in April from a year earlier—the biggest decline in more than 11 years.

Flood of Inventory

One of the reasons rents are ticking down after an unprecedented run over the past 20 years is that many renters in the second half of 2022—pushed to their financial limits—simply gave up. Many moved back in with their parents, some took in roommates and others moved to less expensive cities.

But a bigger reason is that there are a historic number of new apartments being built, forcing landlords’ hands to make concessions and lower rents. Construction is particularly busy in the South and Southwest.

Housing analysts pay even closer attention to new-lease rents, which they believe to be a leading indicator. Indeed, 48 of the 100 largest cities in the U.S. are lowering rents on new leases, according to Apartment List.

Also of importance are rental vacancies, which increased by 2.6 percentage points in 2022.

“There’s effectively a cap on how much rents can rise on renewal in today’s market,” Parsons says.

Apartment dwellers who renew their leases, however, paid 6.5% more to renew their lease in May, affording to RealPage—still high but down from a peak of 11%.

Without question, renting an apartment or a house, no matter where you are in the United States, is still expensive.

Of the recent rental declines, Warnock says, “It’s a break from the affordability crunch—but it’s not an affordability windfall.”

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StreetTalk
After being hit with double-digit increases in the past three years, renters are finally catching a break, with Redfin data showing rents declining 0.6% in May.
rent, inflation, housing costs
493
2023-26-14
Wednesday, 14 June 2023 11:26 AM
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