Finally, some much-needed relief for renters may be within sight. After persistently high rental prices throughout the pandemic, “price increases are cooling off — and prices are even falling, in some cases,” said The Washington Post.
Of course, for some this may feel like cold comfort, as the reality is that “rent prices are now 33.4% higher than they were before the pandemic,” said NerdWallet. And while “rental growth seems to have slowed from the major spikes of 2022,” the shifts are not necessarily hitting all rental types and metro areas the same.
What are rent prices expected to do next?
There is evidence to suggest that growth in rental prices is, for the most part, finally slowing down. In July 2024, rents were only “3.4% higher than at the same time last year,” said NerdWallet. They were also “slightly below pre-pandemic averages,” as “the average annual growth was 4% in July 2018 and 4.2% in July 2019.”
In further evidence of this potential downshift, “for half of U.S. counties, the increase in rents from June 2023 to June 2024 was the smallest rent change in more than three years,” and “nearly three-quarters of counties saw a smaller increase than the year before,” said the Post.
Just how much of a cooling off you see may depend on whether you are looking at a single-family rent, an apartment or a multifamily rent. In April, for instance, multifamily rents “were 0.8% lower than they were in the same month last year, according to Apartment List,” said CNBC, whereas “apartment rents did rise for the third straight month, but the growth, at 0.5%, is very small.” Meanwhile, “single-family rents are much stronger, up 3.4% in March year over year, though that annual increase “continues to shrink as more supply comes onto the market from build-for-rent companies.”
What about notoriously expensive locations?
It really depends. Of 33 major U.S. metropolitan areas analyzed, “the following five had the biggest drops in asking rents in July compared to a year ago,” said Money: Austin, Texas; Jacksonville, Fla.; San Diego; San Francisco; and Tampa, Fla.
Meanwhile, some metros are continuing to see rental price increases. “Among 50 metros, the following had the highest annual rent increases among all types of housing,” said NerdWallet: Hartford, Conn.; Cleveland; Providence, R.I.; Louisville, Ky.; and Richmond, Va.
Why are rents falling?
A big part of the reason rents are finally on their way to falling is “because of the sheer number of apartments built over the past two years,” Sheharyar Bokhari, a senior economist at Redfin, said to Money.
In fact, while “new multifamily building permits are slowing down,” the “number of units currently under construction is near a record high, and last year saw the most new apartments hit the market in over 30 years,” said CNBC.
Additionally, the much-anticipated slowdown “comes as more new homes are finishing construction and finally hitting the market,” said the Post. This may allow some people to finally gain a toehold in homeownership.
However, that is not necessarily true for all prospective buyers. “The continued strength overall in single-family rents indicates that potential homebuyers who are priced out of the home-purchase market are choosing to rent similar alternatives,” said CNBC, citing Molly Boesel, a principal economist for CoreLogic.
Things may finally be cooling off
