The cost of renting an apartment is falling in some U.S. cities after reaching a record high in the first half of 2022.
Between July and August, the national average asking price for a one-bedroom apartment fell 2.7% to $1,721, while rent for a two-bedroom dropped 2.4% to $2,054 according to Rent.com. The median rent in the nation’s 50 largest cities fell to roughly $1,771 in August, according to Realtor.com.
Those declines are in stark contrast to 2021, when some cities saw rent hikes of up to 25%. The drops also suggest that a once white-hot rental market has hit a ceiling, economists said.
“I wouldn’t get too excited over a reduction in rental prices,” Nest Seekers International chief economist Erin Sykes told CBS News. “I think it’s more of a plateau.”
Why rents are cooling
Rent is dropping in some parts of the country for three main reasons. First, there’s been an uptick in the number of available apartments.
“Anytime you have a little bit more supply, the price is going to come down a little bit,” said Jon Leckie, a researcher at Rent.com.
Second, demand also has softened as some people have exited the rental market to buy a home. Third, painfully high inflation continues to outstrip wage growth and diminish most people’s purchasing power, effectively putting a lid on what landlords can ask for.
“There’s a limit to what people are willing and able to pay for rent,” he said. “And when you’re going up 20 to 25%, you’re going to hit that limit pretty quickly.”
Rents showed their first sign of a decline in July, when prices dipped 0.1% nationwide, according to real estate data firm CoStar Group, which owns Apartments.com. Prices dropped further in August.
Here are the U.S. cities that have seen the steepest drop in the cost of a one-bedroom apartment in August compared with a year ago, according to Rent.com.
- St. Louis, Missouri (-39.6%)
- Long Beach, California (-24.4%)
- Anaheim, California (-22%)
- Baltimore, Maryland (-20.3%)
- Cleveland, Ohio (-19%)
- Pittsburgh, Pennsylvania (-16.5%)
- Los Angeles, California (-15.7%)
- Albuquerque, New Mexico (-14.5%)
- Jacksonville, Florida (-14.2%)
- Colorado Springs, Colorado (-14.1%)
Charlotte, North Carolina; Des Moines, Iowa; and El Paso, Texas, are seeing sharp year-over-year declines in two-bedroom units, Rent.com found.
Price drops from July to August probably won’t deepen as 2022 comes to an end, Sykes said.
“So if you need a place to live, if you need a new rental, it is a good time to enter into it because it’s not going to get any better,” she said.
Rents fell in large cities in 2020 during the early months of the coronavirus pandemic as many people fled to smaller metro areas. But as pandemic restrictions were lifted, large numbers of Americans returned to big cities, driving up demand for housing, particularly in Florida and New York. Rising home prices, mortgages and soaring inflation have also caused rents to skyrocket.
Notably, rents have yet to ease in many cities and remain exorbitant in others. Rent for one-bedroom units are still up sharply in places like Greensboro, North Carolina (up 45.3% in August from a year ago); Aurora, Illinois (43.5%); and Tempe, Arizona (35.5%). In places like Boston and Oakland, the average two-bedroom fetches well over $5,000 a month, while a one-bedroom in New York averages $5,400, according to Rent.com data.
More affordable units hitting the market could provide some price relief, but as long as mortgage rates remain elevated, more Americans will likely turn to renting rather than venture into homeownership, Leckie said.
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