Slow and Steady: U.S. Rent Growth Shows Signs of Stability
Despite the soaring home prices in recent months, there's been a noteworthy moderation in rent growth. According to Realtor.com's April Rental Report, the U.S. median asking rent increased only marginally by $4 to reach $1,734. This figure is still down by $43 from its peak, signifying the ninth consecutive month of single-digit growth following a 15-month slowdown from the zenith of 16.4% growth in January 2022.
While the median rent across the top 50 metros witnessed a marginal 0.3% year-over-year increase, this figure marks the slowest growth rate since the pandemic's onset.
A Closer Look at the Figures
It's not just the overall rent growth that's seeing a slowdown; the rental market for two-bedroom units is experiencing a similar trend. The report shows that the rent growth of two-bedroom units increased by just 0.9%, the slowest rate since the pandemic started. Even though this marks the fourth straight month of positive rent gains for two-bedroom units, the median rent of $1,936 is still $32 lower than its peak in July 2022.
The picture isn't too different for one-bedroom units either. With a 1.2% decrease in rent growth, the median rent stood at $1,618, maintaining parity with last month's figures. However, the rental rates are still up by 25.3% since April 2019.
Interestingly, the report showed an uptick in the rent growth of studio apartments, which rose to 2.1%. This trend highlights the rising demand for affordable housing options, as the median rent for studios currently stands at $1,444.
A Glance into the Future
A significant increase in multi-family construction seems to be one of the primary factors contributing to the deceleration in rent prices. In fact, this has helped the vacancy rate to hit a two-year high at 6.4% in Q1 2023.
As more rental properties are added to the mix, it is expected that the vacancy rate could inch back towards the norms witnessed in 2013-2019, which hovered around 7.2%. This shift would be a welcome respite for renters, contributing to improved affordability.
However, it is crucial to note that despite the slowing rent growth and an increase in available rentals, average rent still costs 25.1% more than it did at this time in 2019.
Realtor.com's Chief Economist Danielle Hale highlights the encouraging trends, pointing out that "the challenging affordability picture may begin to improve." The record-high new construction in the multi-family space is creating more units, reducing competition, and helping ease prices.
While we can expect to see the impact of these trends reflected in future CPI reports, it's important to remember that these changes may take until 2024 to significantly materialize. Nevertheless, these shifts in the rental landscape promise a silver lining for renters and, by extension, the broader economy.
As your trusted realtor based in Tampa, I will continue to keep you updated with the latest market trends and shifts, providing you with valuable insights to help navigate your real estate journey.