The Highest Monthly Rent in the United States Declines for More Than Three Years
The asking monthly rent in the United States fell to $1,967 in November, a decrease of 2.1% from last year, but still 22% higher than pre-pandemic levels, according to a report from the real estate agency Redfin. Apartment construction increased by 7% year-over-year in the third quarter, with landlords offering more incentives to encourage moving. More supply has driven rental vacancy rates up to 6.6%, the highest level since the first quarter of 2021.
The Highest Monthly Rent in the United States Declines for More Than Three Years
The asking monthly rent in the United States fell to $1,967 in November, a decrease of 2.1% from the same period last year, marking the largest annual decline since February 2020. Rents have decreased by 0.6% since October, according to a new report from the real estate agency Redfin.
The decline in prices can be attributed to a boom in apartment construction over the past few years, which helped to increase the supply of available apartments in the market by 7% year-over-year in the third quarter. To assist in renting out apartments, owners are relying on incentives such as a month of free rent or reduced parking costs, meaning some tenants may even secure a lower price.
“Tenants are finally getting a break,” said Darryl Fairweather, chief economist at Redfin. “Better deals have become easier to come by as landlords are making concessions, and rents have begun to decline in a noticeable way. The increased supply also means that tenants have more good options to choose from.”
Rents Down, But Still Higher Than Pre-Pandemic Levels
Rents may be declining, but they are still significantly higher than pre-pandemic levels, with this month’s reading being only 4.2% lower than the record high of $2,054 in August 2022, but 22% higher than November 2019.
Affordability issues, both in renting and homeownership, have reduced demand for rental units, while economic uncertainty has also pushed landlords to lower their asking prices. Rental vacancy rates in the third quarter stood at 6.6%, the highest level since the first quarter of 2021.
The federal interest rate hike has driven mortgage rates this year to their highest levels in over two decades, nearing 8% in October, which adds thousands of dollars to monthly mortgage payments compared to mortgages obtained at less than 3% by buyers in 2021. Mortgage rates have decreased, falling this week to just over 7%, the lowest level since July.
The rise in mortgage rates has not led to a decrease in home prices. In October, the median sales price of homes was $391,800, an increase of 3.4% from the low-price environment in October 2022.
The result has been that homeownership has become more challenging for many Americans. The National Association of Realtors found that a family needs an annual income of $107,000 to buy a typical home, compared to just $88,000 a year ago.
“With the rising cost of homeownership, rents are starting to lose their appeal,” said Fairweather. “However, we may see more renters transitioning to the homebuying market next year as home sale prices and mortgage rates decline.”
Sources:
Investopedia
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Redfin. “The Tide Turns for Renters as Asking Rents Post Biggest Decline in Over 3 Years.”
FRED, Federal Reserve Bank of St. Louis. “30-Year Fixed Rate Mortgage Average in the United States.”
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