As national rent growth dropped to its lowest annual pace since June 2021, the Realtor.com Monthly Rental Report has indicated a cooling rental market. Dropping from its July peak, the U.S. median rental price for September also posted its second month-over-month decline in eight months.
For zero to two-bedroom units ($1,759), the U.S. median rental price grew at a single-digit year-over-year pace (+7.8%) and dropped on a month-over-month basis, bringing total declines in September from July to $22. For the second month in a row, rent growth for larger units also cooled in September, with two-bedroom ($1,941) and one-bedroom ($1,647) median rental prices both rising at a single-digit year-over-year pace, up 6.4% and 7.7%, respectively.
Studio rental prices followed a similar pattern of deceleration for the month, dropping $15 from the July peak to a median of $1,483. Yet, studios were the only unit size to maintain a double-digit annual growth pace in rents, up 10.1% (+$136) from September 2021.
"After more than a year of double-digit yearly rent gains and nearly as many months of record-high rents, it's especially important to see consistency before we confirm a major shift like the recent rental market cooldown. But September data provides that evidence, as national rents continued to pull back from their latest all-time high registered just two months ago," says Realtor.com chief economist Danielle Hale.
Although September marked the second straight month of consistent moderation in national rents, renters are still facing significantly higher housing costs than in prior years. With national rents for all unit sizes at more than 1.2 times their 2020 levels in September, rental affordability remains a challenge, especially as inflation continues to outpace wage increases.
"This return of more seasonal norms indicates that rental markets are charting a path back toward a more typical balance between supply and demand, compared to the previous year. We expect rent growth to keep slowing in the months ahead, partly driven by the impact of inflation on renters' budgets. However, it's unlikely that rents will return to a more normal pre-COVID pace of growth for at least another year, when available rental inventory starts to reflect the recent uptick in multifamily new construction,” says Hale.
Local rental markets also showed a return to more typical activity in September. Many Sun Belt metros showed substantial signs of yearly rental growth moderation. However, big tech cities were among the only large markets to post double-digit annual rent gains in September. These metros, including other large metros, were Chicago (+23.9%), Boston (+19.9%), New York (+18.2%), Providence, Rhode Island (+16.7%), Oklahoma City (+13.8%), Miami (+13.2%), Kansas City, Missouri (+11.2%), and San Jose, California (+10.7%).
September rent increases were smaller in more than three-quarters of the biggest markets, including many in the Sun Belt. For the first time in at least 15 months, rents increased by single digits year over year in Dallas (8.8%), San Diego (8.4%), and Orlando, Florida (8.3%). For annual rental price declines, Riverside, California (-1.0%), Tampa, Florida (-0.3%), Las Vegas (-0.2%), and Sacramento, California (-0.1%), posted their first yearly drop in rents since the beginning of the pandemic.
"Realtor.com's September data highlights the true extent of the rental market boom that has taken place over the past three years and underscores the prevalence of rental affordability challenges faced by many Americans today. Recent surveys we've conducted at Avail also show that higher housing costs are a significant financial strain for many renters and landlords, at a time when inflation is driving up prices across the board," says Ryan Coon, vice president of rentals at Realtor.com and co-founder of Avail.
"In some good news for renters—and further evidence that the rental cooldown will continue—many surveyed landlords indicate that they are adjusting their pricing strategies to account for tenants' tighter budgets."
