When will America's rental prices come down?

Renters are about to get some long-awaited relief

A brick building
(Image credit: kolderal/Getty Images)

Good news, renters: The cost of rent looks like it's finally on its way down. Over the one-year period ending in May 2023, new-lease asking rents went up by less than 2%, which "represents the largest deceleration over any year in recent history," The Wall Street Journal reported.

Existing renters who are looking to renew their leases may also get a leg up in the near future, with the rate of rent increases upon renewal starting to mellow out. This could begin to "shift bargaining power to tenants in some hot rental markets, after years during which owners had leverage," per the Journal.

What are rent prices expected to do next?

Compared to a year ago, most sources still show new-lease asking rents going up a bit. However, overall there's a downward shift in the rate at which rental prices are increasing. As mentioned, new-lease asking rents went up by less than 2% on average between May 2022 and May 2023 — a far cry from "the double-digit increases of a year ago," per the Journal.

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"When you combine May's gains with the previous months in 2023, the current year-to-date growth rate is 1.9%," Nerdwallet said, citing data from Zillow showing that this growth rate falls below the pre-pandemic 2.7% average cumulative growth rate for the first five months of the year.

Still, these potential declines don't mean renters aren't still paying a lot. In data from the Bureau of Labor Statistics released in May 2023, the price index for shelter, which encompasses rent, "was the largest contributing factor for both the overall inflation increase and the core inflation increase," Nerdwallet reported. Still, "there's also a lag in how rent data is reflected in the CPI," given the typical one-year length of leases.

What about notoriously expensive locations?

The Journal noted in February that "new-lease rents have fallen most sharply in some of the nation's biggest metro areas," such as Boston and Las Vegas. In fact, "none of the 52-largest metro areas tracked by Apartment List experienced positive rent growth," from August 2022 through January 2023. Similarly, traditionally hot spots for renting like Los Angeles and New York saw declines in rental prices, of 0.9 percent and 3 percent, Yahoo Finance reported.

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And as the year weathers on, these earlier indications of rental price declines in big cities seem to be playing out, at least in some locations. Based on data from Apartment List, "48 of the 100 largest U.S. cities are posting negative rent growth for new leases, measured on an annual basis," the Journal reported in June.

Why are rents falling?

"Many tenants have maxed out on how much of their income they can devote to rent, while the specter of layoffs has created new concerns for some," the Journal said. Other potential renters are finding that prices are still out of reach for them.

A boom in new construction is also pushing down rents, particularly in "the South and Southwest, which are seeing the most construction," according to the Journal. Not only can this make it harder for landlords to demand higher rents as competition increases, it can give renters more options.

The economic slowdown amid inflation reduction efforts is also at play, as is the state of the housing market, where "national median existing-home price fell 1.7% in April from a year earlier, the biggest year-over-year price decline in more than 11 years," the Journal noted. "There's certainly a correction taking place," Rob Warnock, a researcher at rental website Apartment List, told the paper.

Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She has previously served as the managing editor for investing and savings content at LendingTree, an editor at SmartAsset and a staff writer for The Week.

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