(Liberal Voice Network) – In a promising development for renters, a Realtor.com report released on Monday reveals that the median rent in the US for May has dropped compared to May 2022, marking the first annual decline in at least three years.
The national median asking rent in May reached $1,739, showing a slight increase of $3 from April but a decline of 0.5% from May 2022. This decrease is a significant milestone as it is the first time such a decline has been recorded since Realtor.com began tracking year-over-year data in March 2020.
Realtor.com’s chief economist, Danielle Hale, commented on this positive trend, stating, “This is yet another sign that rental-driven inflation is likely behind us, even though we may not see this trend in official measures until next year. Although still modest, a decline in rents combined with cooling inflation and a still-strong job market is definitely welcome news for households.”
While rents have been gradually decreasing since their peak in July 2022 at $1,777, they still remain nearly 25% higher than in 2019.
After experiencing “pandemic pricing” throughout much of 2020, rents began soaring in 2021 as people returned to urban areas for in-person work and school. Many individuals were priced out of homeownership, leading to a high demand for rentals. The overall rental market is now shifting in favor of renters, although there may still be some sticker shock for those who have stayed in the same rental property over the past couple of years.
Renters who have chosen to stay in the same place for the past few years without moving may not be paying the current market rent. If they decide to relocate this year, despite the declining market rents, they might encounter higher rental payments.
According to the report, there was a 3% year-over-year rent decline in the West and a 0.7% decline in the South for the month of May. On the other hand, the Midwest and Northeast are still witnessing rent increases. This may be attributed to the Midwest’s affordability and low unemployment rates in the region, as well as strong labor market conditions driving rental demand in the Northeast.
Among metro areas, Columbus, Ohio, saw the largest year-over-year rent increase at 9.3%, followed by St. Louis, Missouri, and Cincinnati, Ohio, both at 7.7%. Conversely, the largest year-over-year declines were observed in Las Vegas (-6%), the Riverside and San Bernardino area in California (-5.9%), and Phoenix (-5.7%).
Hale predicts that rents will continue to soften throughout the rest of this year and into next year. This trend will be supported by an expected surge in supply, thanks to the historic levels of multifamily construction currently underway.
It is important to note that this cooling trend in the rental market may take some time to reflect in national inflation gauges, particularly the Consumer Price Index (CPI). Shelter, which predominantly measures rental leases and the implicit rental value of owner-occupied properties, carries significant weight in CPI calculations but lags due to infrequent data collection and changes in lease agreements.