US Rents Register First Annual Increase in 6 Months

Slower apartment construction could push up rents even further in the future along with a loss of perks such as free parking, an economist said.

A sign in front of an apartment building in San Francisco on June 9, 2023. Justin Sullivan/Getty Images

Rents across the United States increased last month on an annual basis, with Cincinnati, Baltimore, and Washington, D.C., housing markets seeing significant gains, according to real estate brokerage Redfin.

“The median U.S. asking rent rose 0.4 percent year-over-year to $1,607 in February—the first increase in six months and the biggest in nine months,” the company said in a March 7 statement. “On a month-over-month basis, asking rents climbed 0.6 percent.”

Rental price changes differed in terms of apartment sizes. For smaller apartments with 0 to 1 bedrooms, rents rose on an annual basis. Gains were also seen in two-bedroom apartments. However, for apartments with more than three bedrooms, rental prices registered a decline.

Out of the 44 major metropolitan regions analyzed by Redfin, Cincinnati saw the biggest jump in rental prices at 15.3 percent. This was followed by Providence, Baltimore, Washington, and Cleveland.

While overall asking rents rose nationwide last month, “they’ve been relatively flat for the past 10 months compared to the large swings of the past few years,” the brokerage said.

During the pandemic period when people were switching residences in a frenzy, rents rose by as much as 18 percent on an annual basis. The increase fell to 4 percent by 2023.

At present, asking rents are “flattening because rental supply and demand are near equilibrium,” according to the report.

Redfin Senior Economist Sheharyar Bokhari said the era of large rent declines is over in much of the United States.

“A ton of new apartments have hit the market, and demand for those apartments is strong because it’s so expensive to buy a home,” he said in a statement.

“But apartment construction is starting to slow, which means there may be more renters than apartments to go around as soon as next year. That could cause rents to tick up and the perks that many renters have grown accustomed to—like free parking—to disappear.”

Real estate marketplace Zillow expects elevated mortgage rates to dampen demand for home purchases, making many prospective homebuyers stick with renting.

The company forecasts single-family rents to rise by 3.7 percent this year, with multifamily rents projected to increase by 3.1 percent.

“With apartment construction slowing, the growth rates for single-family and multifamily rents are expected to converge more closely than in recent years,” Zillow said in a February report.

Mortgage Rates, Rental Construction

The average weekly rate on a 30-year, fixed-rate mortgage has remained above 6 percent for more than two years. For the past several months, rates have been hovering around the 7 percent level.

For the week ending March 6, the mortgage rate was at 6.63 percent.

“As the spring homebuying season gets underway, the 30-year, fixed-rate mortgage saw the largest weekly decline since mid-September,” said Freddie Mac Chief Economist Sam Khater in a statement.

“The decline in rates increases prospective homebuyers’ purchasing power and should provide a strong incentive to make a move.”

Whether strong homebuying demand kicks in will depend on how low the mortgage rates drop this year. As long as rates remain elevated, renting seems like a better financial choice for many people.

Fannie Mae is forecasting rates to end 2025 at 6.6 percent and to drop only slightly to 6.5 percent next year. “The net effect of tariffs on mortgage rates is unclear, and there are plausible scenarios for both upward and downward movement in rates,” it said in February.

“As such, we continue to expect mortgage rate volatility as markets react to tariff implementation, incoming economic data, and other fiscal policy changes.”

A scenario of elevated rates could lend support to rental construction projects.

The “build-to-rent market is firing on all cylinders,” according to a January report by real estate listing portal Point2Homes.

“Strong construction activity” is underway across most metros and states in the United States, it said. “Nationwide, more than 110,000 new single-family homes for rent are currently under construction.

“Whether developers broke ground on these projects three days or three years ago, it’s likely that the bulk of them will reach renters in search of more living space and better amenities in the months and years to come.”