U.S. renters have been particularly hard hit by inflation, with one economist describing September’s surge in rents as “worrisome.” But some good news may be on the horizon, with Realtor.com discovering that rents in some big cities are starting to drop.
Inflation has remained stubbornly high this year, with government data this week showing prices risingSeptember rents rose 0.8% in August alone, the biggest monthly increase since June 1990. At this pace, renters will pay landlords about 10% more in 2022 than they did last year, Pantheon chief economist Ian Shepherdson said in a research note. In it, he called rent increases “disturbing.”
Such an increase “would probably be unsustainable in an economy where wage growth is at half its pace and is likely to slow,” he added.
Despite that trend, there are signs of some reassurance for renters. The median rent in his 50 largest cities in the United States fell to $1,759 in September, a decline of less than 1%. according to Go to Realtor.com. According to Realtor.com, Sunbelt cities such as Riverside and Sacramento, California, Las Vegas and Tampa, Fla., have seen prices drop sharply.
Jay Lybik, national director of apartment analytics for CoStar Group, which owns Apartments.com, said other cities that saw rents soar last year are likely to bounce back in the coming months.
“This is just the beginning of the market trying to return to equilibrium,” he told CBS MoneyWatch.
Reasons why rents are cold
Prices have fallen as demand for apartments has declined and sales have increased.
That’s right. Both Zillow and his ApartmentList report falling rents, showing a discrepancy between what the Department of Labor is showing and what property trackers are reporting in real time.
This discrepancy is due to significant lags in how the government collects rent data. The government tracks all rent payments, not just for new leases, most of which do not change from month to month. Lybik said it could take at least a year.
Because of that delay, Shepherdson predicts “a few more months, about three months, of significantly higher monthly CPI rents, followed by a distinct slowdown.”
Rents fell in big cities in 2020.Many fled to smaller metropolitan areas. But as pandemic restrictions were lifted, many Americans returned to the big cities, boosting home prices and demand, especially in Florida and New York.At some point last year, some cities up to 25%
Monthly rents are falling in some parts of the country, but exorbitant prices continue in many cities. Unit prices are still skyrocketing in places like Kansas City, Kansas (he’s up 11.1% in September from a year ago). Fayetteville, North Carolina (11%); Columbia, South Carolina (9.7%), according to ApartmentList data.
—The Associated Press contributed to this report.