The median asking rent in the United States fell 0.4% to $1,937 in March from a year earlier – the first annual decline since the Covid-19 pandemic hit in March 2020 – as the cost Still high life expectancy and increased economic uncertainty have hampered rental demandaccording to a recent Redfin (RDFN) report.
“Rents are coming down, but it kind of looks like they’re getting back to normal, which is healthy to some extent,” said Dan Close, a Chicago-based Redfin real estate agent. The median March asking rent in the state was 9.2% lower than a year earlier.
The overall fall in rents in the United States stems in large part from a glut of supply resulting from the pandemic boom in residential construction. And with vacancies rising, landlords have reduced rents and offered concessions.
Meanwhile, the median asking rent was unchanged M/M in March, remaining 19.9% higher than it was at the start of the pandemic. At the same time, wages increased at roughly the same rate.
During the pandemic, some “tried to sell but did not get a satisfactory offer due to slowing demand from homebuyers,” Close added. “Now we have a lot of rental supply, which drives prices down as tenants have more options.”
The metro areas that saw the largest rent declines were Austin, Texas (-11%), Chicago, Illinois (-9.2%) and New Orleans, Louisiana (-3%). In contrast, Raleigh, North Carolina (+16.6%), Cleveland, Ohio (+15.3%) and Charlotte, North Carolina (+13%) were among the metro areas with the largest rent increases.
A big part of the reason consumer price inflation remains stubbornly high is – you guessed it – rent, which typically lags house prices. While the headline CPI slowed by one percentage point to 5.0% year-on-year in March, the core CPI, which excludes volatility in food and energy prices, accelerated to 5, 6% against 5.5% in February.
But things look set to improve on the central front as rent inflation begins to recede. Odeta Kushi, Deputy Chief Economist at First American Family of Companies, took to Twitter saying that “Owners’ Equivalent Rent (OER) and Prime Rent (~41% of Core CPI) increased by 0.5% after bouncing between monthly increases of 0.6%-0.8% for about a year. More housing inflation deceleration ahead.”
“Decelerating housing inflation will drive headline CPI lower in coming months, demand growth appears to be slowing, as does wage growth,” Kushi added in a follow-up. Tweeter.
For the week ended April 13, the 30-year fixed rate mortgage averaged 6.27%, down slightly from 6.28% the previous week and up from 5.0% of the previous year.