Deceleration Of Year-Over-Year Rent Growth Persists

Mortgage News April 11, 2023

In March, the national rent index showed a 0.5 percent increase according to the April 2023 Apartment List National Rent Report. This marks the second consecutive monthly increase and a slightly faster pace than the previous month. The magnitude of this month’s increase is comparable to the typical price fluctuations observed in March before the pandemic. Following a year of record-setting price drops in 2022, it appears that rental demand is returning to its usual seasonal pattern.

The rate of year-over-year rent growth has been slowing down and is currently at 2.6 percent, which is the lowest it has been since April 2021. This rate is slightly lower than the average rate observed between 2018 to 2019, which was 2.8 percent, and it is expected to decrease further in the upcoming months.

Although rent growth has returned to positive territory, we are observing a relaxation in the supply of housing units in the market. The current vacancy index is at 6.6 percent, which is consistent with the average rate before the pandemic. As there is a high number of multi-family apartment units being built, we anticipate that the supply constraints will persistently lessen. Consequently, property owners may start to compete for renters instead of the opposite scenario for the first time since the beginning of the pandemic in 2023.

The U.S. rental market witnessed a seventh consecutive month of single-digit growth in February 2023, following a slowdown from the peak growth rate of 16.4% in January 2022, which persisted for 13 months. The median rent for 0-2 bedroom properties in the top 50 metros increased by only 3.1% year-over-year. The median asking rent decreased by $1 from last month and $48 from the peak, currently standing at $1,716. However, it is still $296 (20.8%) higher than the pre-pandemic levels observed in 2020.

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