Rental prices in the United States saw little change last month, continuing a two-year trend of stable prices, according to a recent report from real estate brokerage Redfin.
“Rents have remained largely flat over the past two years, after a surge in demand during the pandemic led to a construction boom across a number of Sun Belt states,” the report states.
However, rental growth trends could be different based on the market, with some metropolitan areas experiencing double-digit spikes while others have been declining by the same degree, the brokerage said.
Region-wise, rents in metro areas in the Sun Belt generally fell, while those in the East Coast and the Midwest posted the biggest hikes.
The highest year-over-year rent increase among the 50 most populous metros was seen in Virginia Beach, Virginia, followed by Washington, with both places registering a jump of more than 11 percent. Cleveland, Chicago, and Baltimore followed, each city seeing a hike of more than 8 percent.
Raleigh, North Carolina, saw the largest rent decrease, followed by Florida cities Tampa and Jacksonville; Austin, Texas; and San Diego. All decreases were in single digits.
“New apartments are being completed at the fastest pace on record, and that’s leading to rents falling in places like Tampa or Jacksonville, where supply now outweighs demand,” Redfin senior economist Sheharyar Bokhari said.
“Construction is slowing, but we will continue to see a wave of new apartment buildings coming onto the market in coming months, which is good news for renters looking for an affordable rental in 2025.”
Rents fell across all bedroom counts, for studios and one-, two-, and three-bedroom-plus apartments, the brokerage noted.
This is an indication of a softening rental market, according to the report. Competition among renters was found to have eased as well.
People Opting to Rent
With homebuyers facing affordability issues, the number of renter households in the country hit a record 45.6 million in the third quarter, according to Redfin.Over the past two years, wages have risen by around 4 percent per year. During this period, rents have largely remained stable, while home prices went up by 10 percent, thus making rentals more attractive.
As people looking to buy properties face the prospect of high mortgage rates and prices, renting increasingly becomes the “only viable choice” for many, Bokhari said.
“Building more homes will help address that, but we also have to recognize that Gen Z and future generations may not view homeownership as a life goal and the rentership rate may continue to rise for years to come,” Bokhari said.
In the 50 top metropolitan areas analyzed in the study, renting was found to be cheaper than buying in all the places. The typical mortgage payment for a median-priced home was $2,703, higher than the typical monthly rent of $1,979.
The monthly cost of owning a home was at least 50 percent higher than renting in 21 out of the 50 metros.
Even though the premium to buy a home comes down over the coming years, it is expected to remain more expensive than renting, according to the brief. Only if mortgage interest rates and home prices decline considerably can homeownership costs narrow toward the cost of renting.
“With long-term mortgage rates expected to remain above their pre-pandemic levels, homeowners may find that the low financing they secured years ago will keep them in their current homes for longer,” CBRE said. “This in turn will continue to suppress for-sale activity, which will further boost home prices.”
