Overall, national rent hit a median price of $1,879 in July, the 17th straight monthly record high, but up just $2 from June.
Early in the covid pandemic, Americans were abandoning big cities for suburban areas, thinking they’d be less likely to catch the disease in an area with less people.
Not surprisingly, that pushed up residential rents in suburban areas, while restraining them in urban areas.
The rental price advantage of living in the suburbs versus urban areas plummeted by 52.9% from July 2019 through July 2022, a study by Realtor.com, a real estate information service, said. That advantage slid to $107 per month from $175 three years earlier.
The median urban rent totaled $1,928 a month in July, compared to $1,821 for the burbs.
Overall, national rent hit a median price of $1,879 in July, the 17th straight monthly record high, although it rose only $2 from June.
Rent Growth Deceleration
So far this year, annual rent gains have consistently shrunk each month, so perhaps the rental market is near a turning point. Year-over-year rent growth totaled 12.3% in July, the lowest number since August 2021, when it totaled 11.5%.
Elevated mortgage rates will likely push prospective homebuyers to rent instead, boosting rental demand. But rental construction is soaring, so that demand may be easily satisfied.
Construction completions for new apartments should hit 420,000 units this year, a 50-year high, according to a study by RentCafe.com, an apartment search website.
But for now, “whether in a downtown area or suburb, staying put or making a change, renters are stuck between a rock and a hard place when it comes to affordability,” Realtor.com Chief Economist Danielle Hale said in the group’s report.
And demand for urban rentals will likely rise, she said. “The days of smaller premiums for downtown rentals [over suburban] rentals are numbered, as a return to in-office work and city life is sparking … urban rent growth,” Hale said.
Some Relief is Possible
“Put simply, renters are feeling it everywhere, but there may be some relief ahead. Survey findings suggest that landlords are adjusting their approaches to renters’ tightening budgets.”
But don’t expect too much relief from landlords, as 72% of them said they plan to raise rents within the next year. They said they will act because of higher property management expenses. A total of 79% cited tax payments, 75% listed maintenance and 46% mentioned utilities.
“Like renters, landlords are feeling financial pains from the inflationary economy,” Ryan Coon, vice president of rentals at Realtor.com, said in the report. “To help offset these higher costs, … many landlords are … raising rents.”
Put all this together, and it looks like rents may have topped out. But they don’t seem on the verge of falling much, unless the economy falls into a major recession, which most experts don’t expect.