Rental fees across the country decreased by an average of 0.5 percent in September. Listings are increasing. It has now been five consecutive months that rent prices have decreased, and even though rates are still higher than prices before the pandemic, they’re significantly lower than the record-high cost in July 2022.
This Is Great For Potential Renters
However, this downswing of the home rental market may concern homeowners. Renters and landlords should be aware of the market trends and possible changes in rental prices in this fast-changing market.
Rent prices, inflation, and interest rates are crucial to the affordable and stable housing market for tenants. However, these market variables can be a challenge for homeowners. To create equitable and sustainable housing conditions during an economic downturn, you must know the dynamics of rental rates and find the most effective ways to deal with these fluctuations.
Based on the Zumper National Rent Report, the median rent for the nation is $1,511 a month for one-bedroom homes. It is a month-over-month rise of 0.3 percent and a year-over-year increase of 1.6 percent, the slightest increase in year-over-year in the last two years. The median price for homes with two bedrooms is $1,864, indicating a 3.9 percent increase over the previous year’s median and a 0.1 percent increase from the previous month.
Landscape of the U.S. Rental Market
Even though the COVID-19 epidemic has ended, the trends of the COVID-19 pandemic are still visible in the rental market in the U.S., including Chicago, Boise, Nashville, and Miami. The rate of price slowdowns seen in 2022 is continuing. The data in the report by Zumper indicate that longer is needed to stabilize the unpredictable price fluctuations throughout the pandemic.
Based on Zumper Chief Executive Officer Anthemos Georgiades, the market’s up and down for the past three years has caused an abundance of anxiety in the rental market. A lot of those are currently in the waiting-and-see mode. Georgiades anticipates that rental rates will decrease gradually before eventually settling into regular seasonal patterns.
Many towns and cities nationwide saw an increase in remote workers during and even after the pandemic. The influx led to a dramatic price increase in those “Zoom meeting towns.” When the disease was gone, many (if not most) real estate rental properties were unable to maintain what we would dub reasonable prices as they were often “all full” on current residents. For example, at the height of COVID-19, Boise, Idaho, registered a nearly 25% year-over-year rent rise. Now, post-pandemic, rent is on the decline; the median rent for a single bedroom is now at $1,330, which seems somewhat overpriced based on the overall occupancy in the area. The city is experiencing an 8.3 percent year-over-year and a 6.3 percent decrease monthly.
2023 U.S. Rental Trends
According to the data of Rent.com, in July of this year, rent prices grew by 0.31 percent year over year. However, this rise was less than the 0.40 percent annual average of growth recorded from February 2023. Rents rose by 0.41 percent between June and July.
The median rental price is $2,038. This is $15 less than the median national average in August 2022. Rents peaked in Feb. 2023 at $1,936. Since then, the prices have increased by nearly 5%.
From a broader perspective, The slowdown in rent growth is due to lower demand and the increased supply of inventory. In May, prices fell to a negative year over the previous year. Yet, in the long run, rents have been increasing. There was an increase of 14% in rental costs over the past two years. Since the beginning of 2019, the rent has increased by more than $400, about 25 percent.
In the states where the individual state governments are in the spotlight, 33.33% of those markets experienced a decrease in rent in July. In contrast to a rise of 57% in June states, 64% experienced an increase in July. In contrast, the West is the sole area to see annual declines, which decreased 1.2 percent year over year. Each year, rents increased in the Northeast by 4.65 percent. The Midwest closely followed them, which saw a 4.31 percent increase. However, despite this dramatic increase, renting median in the Midwest was still reasonable at just under $1,400. The growth rate was more moderate in the South, with just 0.25 percent.
Rental Market Crash in 2024?
Many renters and industry analysts believe that the recent fluctuation in rent prices points to the possibility of a housing market crash in 2024.
The increasing interest rate is one of the factors that can result in the rental price falling. To fight inflation to combat the rising cost of living, the Federal Reserve is raising interest rates. In the event of borrowing money, it is costly and may lower the demand for rental property. The steady growth in the availability of rental properties across the nation is another reason that can make rental rates fall. The rental market may be affected by the weakening of the American economy. Should the American economy slow in 2024, renting homes will likely decline. People suffering from lower earnings or job losses are most likely to relocate to smaller units in rental or relocate with their families.
It’s not fixed in bricks and mortar, however. Certain factors suggest a robust renting market in 2024. For instance, landlords will likely face increased costs and then pass the cost to tenants in the event of rising inflation. Additionally, renters’ demand for property may grow in 2024 if the nation’s economy is strong.
Regardless of the outcome, renters and landlords should keep an eye on the market for housing carefully throughout the next few months to observe the emerging trends and how they develop.
Impact on Landlords and Renters
If fears of a crash in the housing market will decrease rent markets in 2024, the renters won’t be averse to that. But, things can become a challenge for landlords in America. There’s fierce competition between landlords who rent to tenants. If rents drop, tenants will be able to choose more options and the ability to select the place they’d like to reside and the amount they’d like to pay.
From a landlord’s perspective: From a landlord’s perspective, rental income growth is crucial to fund equity growth. The income is significant to the well-being of homeowners who are approaching retirement.
When seniors are worried about the possibility of losing out on Social Security and associated benefits like spousal and other benefits, the case of a decline in the rental market could be a significant loss for seniors. So, property owners need to be prepared to offset any losses that may result from lowering rental prices.
