Renters throughout the country are finally seeing a bit of relief when it comes to the seemingly relentless pace of rent growth. The Realtor.com October Rental Report details the shifting marketplace reality.
Nationally multifamily rent growth slowed to 4.7% year-over-year, its slowest pace in 18 months, with the median rent hitting $1,734. Additionally, The Avail, by Realtor.com, 2022 fall landlord and renter survey found that while tenants are still struggling with affordability, the majority of landlords are planning increases in the next 12 months, albeit less than before.
“With soaring inflation and recession fears a huge concern for many consumers, finding affordable housing remains a priority for families,” said Danielle Hale, chief economist at Realtor.com. “Our data indicates that we are finally starting to see a bit of relief from the double-digit pace of rent growth that we experienced during the height of the pandemic.” She added, “While it’s still a bit early to say that we’re officially on a downward trajectory for rent prices, the data shows a promising return toward normal seasonal slowdowns and suggests that the astronomical price gains of the past several years may be behind us.”
Rent prices slowly coming back down to earth
The median rent in the top 50 metros in October was $1,734, down $25 from last month and $47 from the peak in July. This marks the third consecutive month of single-digit growth and the ninth consecutive month of slowing. However, the pace of growth was still nearly 1.5 times faster than it was in March 2020, just before the pandemic hit. During the late fall and early winter, rental demand typically slows, as it’s a less popular time for households to make a move. This year is showing a return to a normal seasonal slowdown that we didn’t see the last two years. Despite these cooling prices, renters are still feeling the sting of the sharp increases of the past several years.
Renters seek affordability after recent rent hikes
The Avail 2022 Fall Landlord and Renter Survey found that:
- Nearly two-thirds (63.2%) of renters who have been in their current unit for 12 to 24 months have seen their rent increase, up from 52.2% in July.
- The median monthly rent increase reported by survey respondents was $138 for lease renewals (compared with $160 in July) and $300 for new leases (the same as in July).
- Despite lower increases, affordability is still a major concern, as 69.5% who had experienced an increase are considering moving to a more affordable rental, up from 66.2% in July.
- Those considering moving are looking for a 12.5% cost reduction, or about $200 per month for the median renter. This is up from 10.3%, or about $125, in July.
Lower rent prices might not be easy to find, as most landlords plan to continue increasing rent
- More than two thirds (70.4%) of landlords plan to raise the rent of at least one unit within the next 12 months (down from 72.1% in July).
- However, there is some good news. The number of landlords planning to increase rent more than 10% shrunk from 25.4% of landlords in April to 18.3% in October.
“While it’s encouraging to see smaller price increases, it’s important to understand that many renters have already absorbed large increases in their monthly rental costs over the past several years, which is impacting their ability to save,” said Ryan Coon, vice president of rentals at Realtor.com. “High inflation and the cost of upkeep and repairs are hitting landlords, who have had to raise rents to cover their higher cost of owning the properties and making it unlikely that they’ll be open to negotiating with new tenants.”
Little room for negotiation as landlords feel the pinch
The increasing cost of ownership and market conditions have affected landlords. However, there is a bit more room to negotiate for renewing tenants:
- While 34.7% of renters attempted to negotiate a smaller rent increase when their rent was most recently raised, only 6% of all renters were successful in doing so.
- Landlords surveyed were not likely to be open to negotiating, but were more likely with renewing tenants. Just 17% of landlords report being somewhat likely (14.4%) or extremely likely (2.6%) to allow a new renter to negotiate over the price of rent. But for renewing tenants, that increased to 21.9% being somewhat likely (17.5%) or extremely likely (4.4%) to negotiate.
- Increasing cost of ownership has led 80% of landlords to increase rent over the past 12 months. Among these landlords, 80.1% indicate that changes in rental market prices in their area influenced their decision to raise rent.
High rent prices affect the ability to save for a home
The typical renter reported being able to save just $100 per month, so it’s not surprising that:
- Just 32.3% of renters are considering purchasing a home in the next 12 months, down from 34.6% in July.
- The biggest reasons cited were not having enough savings for a down payment (44.4%) and believing they would not qualify for a mortgage (19.6%).
- Among renters considering purchasing a home, 83.9% said that rising interest rates and inflation have affected their plans to buy a home, up from 80.8% in July.