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Despite the good news that US rents fell in August, the long-term outlook still doesn’t look promising.
Last month, median rents in the country’s 50 largest cities fell by $10 per month. This is his first drop since November. According to the latest data from Realtor.com.
However, a month-long price drop is not necessarily the beginning of a long-term trend. In fact, rent growth is likely to continue into 2023, said Realtor.com chief economist Daniel Hale. “We expect rent growth to slow, but it may not return to typical pre-pandemic levels,” she says.
Rental demand remains strong due to rising home ownership costs. Mortgage costs have nearly doubled since January, Hale says. This has forced many homebuyers to stay in the rental market, exacerbating already high demand.a chronic housing shortage is another factor.
Year-on-year rental price growth will rise from 5.8% in June 2022 to 8.4% in May 2023, according to Dallas Federal Reserve Bank Forecast We use federal consumer price index data.
Similarly, future Moody’s Analytics forecasts project rent growth of 5% to 7% over the same period, said Thomas LaSalvia, director of economic research at the financial analytics firm. Before the COVID-19 pandemic hit, rents were growing about 4% to 5% annually, he says.
“There are expectations that the Fed will need to raise interest rates further over the next six months to bring inflation back into its comfort zone,” LaSalvia said. “As a result, mortgage rates will remain relatively high.”
Fortunately for renters, Moody’s expects price increases to slow in the second half of 2023 as mortgage costs drop.
“There is also hope that the Fed will pivot [away from continued interest hikes] Once inflation starts to come down, the pressure on the mortgage market will ease a bit,” LaSalvia said.
In the meantime, Realtor.com’s Hale says renters should expect to pay more. To reduce costs, lessees may wish to extend existing leases if the price is affordable. Renters can also consider suburban areas, where rents are growing slower than those in urban areas, she says.
Finally, studio apartments are rising in price faster than one- and two-bedroom apartments, so renters may be able to save money by splitting the larger unit with another person, he said. says Hale.