While rents are falling, the reduction is modest. The median rent is only $11 (or 0.6%) lower than the peak in August 2022. However, in some markets, the drop is more significant, potentially easing financial pressure on renters.
Austin, Texas, has experienced the largest drop in rents, with prices falling by 9.5% year-over-year to an average of $1,481 per month. Following closely is San Antonio, Texas, where rents decreased by 8.2% in June compared to the previous year, with a median of $1,234 per month. Nashville, Tennessee, ranks third with an 8.1% annual decrease, bringing the median rent to $1,525 per month.
Realtor.com economist Jia-Yi Xu noted, "The markets with the largest declines compared to last year are all in the South. This trend is not surprising given the substantial increase in new rental supply in these areas."
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Despite the year-over-year rent decreases, rental prices have generally been on the rise since the COVID-19 pandemic. In June of this year, renters paid an average of $305 more per month than in 2019, a 21.2% increase, which aligns closely with the 22.6% increase in the consumer price index for the same period.
Since June 2019, the rent for a two-bedroom apartment has risen by an average of $363 (23.0%), for a one-bedroom apartment by $264 (19.5%), and for a studio apartment by $219 (17.6%).
Xu points out that, despite significant rent increases, they are still relatively modest compared to the 52.6% rise in median list prices per square foot for homes over the past five years up to June 2024.
San Francisco, California, is the only metropolitan area among the top 50 where rents are currently below five-year levels. Compared to June 2019, renters are paying $153 less per month, saving 5.2%. Xu explains that the pandemic prompted many to leave the expensive tech hub of San Francisco, leading to a significant rent drop. However, the average monthly rent in San Francisco remains high at $2,784.
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In addition to Austin, San Antonio, and Nashville, other cities have also seen significant rent reductions. Las Vegas, Nevada, has experienced a 7.4% year-over-year decrease in rents, with a median of $1,443 per month. Phoenix, Arizona, follows with a 6.8% decrease, bringing the median rent to $1,583 per month.
These rent decreases are also related to the increased supply in local rental markets. The surge in new apartment and rental property construction has led to lower rent prices. Economists suggest that renters in these markets can enjoy more options and lower prices when searching for housing.
While many markets are experiencing falling rents, some places are seeing increases. For instance, Miami, Florida, has seen a 4.5% year-over-year increase in rents, with a median of $2,500 per month. Rent in New York City has also risen, up 3.2% year-over-year, with a median of $3,450 per month.
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The rent increases in these cities are largely due to high demand and insufficient supply. Both Miami and New York City, being major economic and cultural centers, attract many renters and investors, driving up rental prices.
Looking ahead, many economists are optimistic about future rent trends. They believe that as more housing construction projects are completed, the rental supply will continue to increase, helping to further moderate rent increases. Additionally, economic recovery and improvements in the job market are expected to make rents more affordable for a larger segment of the population, stabilizing the market.
However, some experts warn that certain factors could lead to rent increases again. For example, rising construction costs and labor shortages might slow the pace of new housing development, impacting rental supply. Future economic uncertainties could also affect rent trends.
