Rental Prices See Second Consecutive Decline in June 2023

The U.S. rental market experienced its second consecutive annual decline in June 2023, offering some relief to tenants. However, despite the dip in prices, rents remain significantly higher than pre-pandemic levels, according to data from Realtor.com.

Within the top 50 metros, rents for studio to two-bedroom properties fell by 1%, signaling a cooling trend in the rental market. Realtor.com economists noted that while rents in the Midwest have shown signs of slowing, they are still up 3.2% compared to the same period last year. Meanwhile, rents in the West and South regions recorded even larger declines, dropping by 3.8% and 1.3%, respectively, year-on-year.

Despite the recent declines, median asking rent nationwide remains at a notably elevated level, hovering around $1,745. This figure is $31 lower than its peak in July 2022 but still 24.1% higher than the pre-pandemic levels in 2019. Realtor.com economist Jiayi Xu commented on the persistently high rents, indicating that the cost of renting is still relatively steep.

One factor contributing to the stability in the rental market is the reluctance of tenants to move due to the higher costs associated with relocation compared to renewing an existing lease. Xu explained that this trend is likely to dampen the level of competition in the rental market. Additionally, the widening gap in growth rates between rental prices for new tenants and lease renewals further contributes to tenants’ inclination to stay in their current residences.

Furthermore, the rapidly increasing construction of multi-family units has also played a role in alleviating rental market competition. This surge in new construction has slowed the rate of rent growth in recent months, providing renters with more options and potentially limiting landlords’ ability to raise prices significantly.

Despite the high rental prices, many people still find renting to be a more affordable option compared to buying, particularly in areas with elevated housing prices and mortgage rates. As a result, individuals are more likely to stay in the renting market for an extended period.

While rental prices have seen a slight decline in recent months, the rental market remains robust, and the potential for further price adjustments is being closely monitored by experts. As the U.S. economy continues to recover and housing market dynamics evolve, the rental landscape may see further changes in the months ahead.