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Rent prices hit all-time high, but reports signal a coming cool down

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Posted at 4:36 PM, Sep 27, 2022
and last updated 2022-09-27 17:36:32-04

Rent prices climbed to an all-time high in September, according to Zumper data published Tuesday.

Prices are up more than eleven percent compared to 2021. The average one-bedroom costs $1,503 per month, while the average two-bedroom costs $1,845.

But there are signs of an overall cooldown in the market.

Cities like Nashville, Tampa, and Denver reported lower rent prices in September compared to August.

Several other cities, including Phoenix and Fort Lauderdale, reported no change in the rent price from month to month.

"Renters in today's housing market are facing a still-competitive market," said Danielle Hale, chief economist at Realtor.com. "But the good news is that it's not quite as competitive as it has been."

Realtor.com's August rent report shows similar signs of cooling in the rental market.

The median asking rent declined slightly from July to August of this year, according to the Realtor.com report.

It was the first time the company's metrics showed a month-over-month decline in rent prices since last November.

"We've seen landlords really try to make up for some of the lost rent growth that they didn't capture during the pandemic," said Hale. "Some of that make-up period may have passed, and landlords aren't pushing quite as hard on rent increases."

Analysts said there are several factors impacting the cost of rent.

Many of them are outside of landlords' control.

Recent Federal Reserve interest rate hikes have made it more expensive to get a mortgage, pushing would-be homebuyers back into the rental market.

"They're finding that their budgets no longer cancel out," said Hale. "So instead of continuing to search, they've decided to extend their rental term rather than buying a home this year."

"They are competition for finding rental units," said Taylor Marr, deputy chief economist at Redfin. "For anyone looking to move, it's been tighter, and it's because of these people that are being priced out of the first-time homebuyer market staying in place."

Other renters are feeling the pinch of inflation and looking for ways to trim their housing costs.

"During the pandemic, a lot of people didn't want to have roommates," Marr said. "That's partly what explains the elevated rents that we're at now. People wanted more of their own space to do Zoom calls from and work remote. Now, people are incentivized to get a roommate, or maybe even move in with mom and dad."

There are signs that the market will cool further in the coming months.

More than 800,000 new apartments were built or scheduled for completion in 2021 and 2022, according to a recent RentCafe analysis.

It is a construction boom not seen since the 1970s.

"There's still close to a million units that are under construction right now that will be new rental units coming on the market over the next six to twelve months," said Marr. "There is more relief and more supply that will help pull down some of that rent growth in the future."

For renters looking ahead to their next lease, the best option is often the simplest.

"Most people are opting to simply stay in place," said Marr. "We can usually get a lower rent by just renewing the lease versus moving and finding a unit."

Marr said renters can also find a deal by playing into seasonality.

"It's something I've personally done many times," Marr said. "Try to move in the months of February and March. Oftentimes you can save up to a hundred dollars by moving at a less ideal time, in the winter, rather than the peak demand of the summer."

Hale said other renters might find savings by rethinking their preferred location.

"The return to the office caused some renters to consider moving back in, closer toward the office, closer toward downtown," Hale said. "We're seeing a reversal of the trend that was really popular during the pandemic. If you're a renter and you're looking to save money, one consideration might be to look further out in the suburbs, because we are seeing relatively less demand in suburbs."