It looks like American renters might finally be getting a bit of a break as rent growth slows for the tenth straight month.
According to Realtor.com, rent prices only rose by 3.4% in November, the smallest increase in 19 months. In the 50 largest metropolitan markets, the median asking rent actually dropped to $1,712, down by $22 from October and down $69 from its peak in July.
However, it’s not all good news for renters as Danielle Hale, Chief Economist for Realtor.com, warns that “renters will continue to be challenged by affordability in 2023, with rents forecasted to hit more record highs.”
How is Rental Market Doing?
The rental market is doing better than it has in almost two years, with rent prices rising at the slowest rate in 19 months.
The median asking rent for the 50 largest metropolitan markets dropped to $1,712 in November, down by $22 from October and down $69 from its peak in July.
The rent relief varies depending on where you are in the country. While rents in the Sun Belt only rose by 0.9% year over year, Midwestern markets are becoming less affordable with rents rising nearly 10% and 9% in Indianapolis and Kansas City, respectively.
Single-family rents have also slowed to 8.8% growth compared to October 2021, according to a report by CoreLogic, although that is still three times the pre-pandemic rate.
The demand for single-family homes in the suburbs has remained strong during the pandemic, leading to faster rent growth for these properties compared to apartments.
It looks like the slowdown in rent growth may already be having an impact on multifamily construction as well. Multifamily building permits dropped a surprising 18% in November compared to the previous month, according to the US Census.
With the cost of construction still high, rising funding rates, and a slowdown in rent growth, it’s no surprise that some multifamily projects are being canceled. In fact, there were a record 932,000 multifamily units under construction in November, according to the National Association of Home Builders.
With all these factors combined, it looks like we may see an even sharper slowdown in apartment construction next year.
It’s hard to say exactly what the future holds for rent prices in the United States, but it’s likely that they will continue to be a source of stress for many Americans.
While the pace of rent growth has slowed in recent months, rents are still forecasted to hit record highs in 2023. This is especially concerning for those living in Midwestern markets, where rents are already on the rise.
One potential scenario is that rent prices will continue to climb, putting even more strain on budgets and forcing more people to consider alternative living arrangements.
This could lead to an increase in the number of people living with roommates or moving back in with family, at least temporarily.
Possible Future Scenarios for Rental Market
It’s also possible that the high rent prices will drive more people to consider buying a home, potentially contributing to a further increase in home prices.
Alternatively, there is a chance that rent prices could level off or even decrease in some markets.
This could be due to a variety of factors, including a slowdown in demand or an increase in the supply of rental properties. If this were to happen, it would be a welcome relief for renters who have been struggling to afford rising rent costs.
Ultimately, the future of rent prices in the United States will depend on a variety of economic and market forces. Regardless of what happens, it’s important for renters to stay informed and be prepared for any potential changes in the market.
Conclusion
In conclusion, rent prices in the United States have been on the rise in recent years, but the pace of growth has slowed in the past few months. While this may be good news for renters, it’s important to note that rent prices are still forecasted to hit record highs in 2023.
This is especially concerning for those living in Midwestern markets, where rents are already on the rise. It’s difficult to predict exactly what the future holds for rent prices, but it’s important for renters to stay informed and be prepared for any potential changes in the market.
