Rising Rents in the US: An Unaffordable Reality for Tenants
By Renting a home in the US has become increasingly expensive in recent months, with the median U.S. residential rental asking rent rising 2.4% year over year to $1,942 in January 2023 according to Redfin.[0] The Shelter index was the dominant factor in the monthly increase in the index for all items less food and energy, while other components were a mix of increases and declines, according to the Bureau of Labor Statistics.[1]
In Manhattan, the median rent reached a record high of $4,097 in January 2023, a 15.4% increase compared to January 2022.[2] The vacancy rate dropped for the first time in nine months, decreasing from around 2.7% to around 2.5%, while the amount of new leases rose year over year for the first time in three months, increasing from 3,159 to 3,441.[3]
Demand for rental properties is waning, leading to a decrease in rent growth, while the supply of rental properties is increasing. Rents are still 22.5% higher than they were in January 2020, inflation is rising, and economic uncertainty and slowing household formation have caused demand to decrease. In the past few years, construction has been on the rise and more people have decided to rent out their properties instead of selling them, leading to an increase in the rental supply.[4]
Redfin noted that the nationwide rental vacancy rate ceased its decline at the end of last year, resulting in a slowdown in rent growth. It is anticipated that vacancies may increase over the next few months as more new apartments become available.[5]
Recent lower mortgage rates may have drawn some prospective buyers back into the housing market, however, the Fed’s rate increases, which have led to higher mortgage rates, have made the cost of buying a home even more costly.[6] Job and wage growth also factor in, with wages not keeping pace with housing costs, leaving tenants struggling to pay their bills.[7]
Nationwide multifamily rents in January rose from the prior month for the first time since August 2022, growing by 0.4% nationally, according to Yardi Matrix.[8] The 2023 Yardi Matrix Multifamily Outlook expects that rent growth will be closer to its historical average in 2023, with rents remaining flat or rising up to 3 percent.[9]
Overall, rising rent prices in the US are becoming increasingly unaffordable for tenants, prompting more landlords to sell their properties in the hope of getting a better return on their investment.[4]
0. “January rents had the smallest increase since May 2021” Fox Business, 10 Feb. 2023, https://www.foxbusiness.com/lifestyle/january-rents-smallest-increase-may-2021
1. “Housing Costs Are Still Hot. Where Rent Prices Could Be Headed.” Barron's, 14 Feb. 2023, https://www.barrons.com/articles/housing-costs-are-still-hot-where-rent-prices-could-be-headed-8c3fa1d9
2. “Rent in NYC is really high” Gothamist, 14 Feb. 2023, https://gothamist.com/news/rent-in-nyc-is-really-high
3. “City kicks off 2023 with rents at or near record highs” Crain's New York Business, 9 Feb. 2023, https://www.crainsnewyork.com/residential-real-estate/new-york-city-kicks-2023-rents-or-near-record-highs
4. “Redfin Reports Rents Rose 2% in January—the Smallest Increase in 20 Months – Redfin (NASDAQ:RDFN)” Benzinga, 10 Feb. 2023, https://www.benzinga.com/pressreleases/23/02/b30853255/redfin-reports-rents-rose-2-in-january-the-smallest-increase-in-20-months
5. “Cleveland asking apartment rents keep rising as national pace slows” Crain's Cleveland Business, 10 Feb. 2023, https://www.crainscleveland.com/real-estate/cleveland-apartment-rents-keep-rising-national-pace-slows
6. “Housing singled out as largest contributor to inflation: Economists” Inman, 14 Feb. 2023, https://www.inman.com/2023/02/14/housing-singled-out-as-largest-contributor-to-inflation-economists
7. “Apartment rental costs in 2023 to slow back to pre-COVID levels” San Antonio Express-News, 7 Feb. 2023, https://www.expressnews.com/sa-inc/article/apartment-rent-san-antonio-17767771.php
8. “Multifamily Rent Growth Ends 5-Month Streak Of Declines” Bisnow, 10 Feb. 2023, https://www.bisnow.com/national/news/multifamily/rent-growth-breaks-five-month-negative-streak-117617
9. “Multifamily housing rents flat in January, developers remain optimistic” Building Design + Construction, 7 Feb. 2023, https://www.bdcnetwork.com/multifamily-housing-rents-flat-january-developers-remain-optimistic
