By Emma Ockerman
But the worst price hikes may be over for tenants, thanks to slowing rent growth
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US renters looking for housing in April faced a median asking prices $348 higher than the same period in 2019, with rental costs 25.1% above where they were four years earlier, a new report shows.
Though rental-housing costs are increasing at a far slower rate than they were earlier in the pandemic — the median asking price for a studio to two-bedroom rental property across the country’s top 50 metro areas rose by just 0.3% on a yearly basis in April to reach $1,734, marking the lowest growth rate since the pandemic’s onset — tenants might still find themselves struggling to afford a place, according to a Realtor.com report out Thursday.
Here’s a potential comfort, though: Rent growth has now been slowing for 15 months, Realtor.com said, and asking rents in April were actually down $43 from last year’s peak.
“In April, we continued to see rising rent prices and a moderating growth rate,” Danielle Hale, Realtor.com’s chief economist, said in a statement. “This is promising news for renters, suggesting that the pandemic peaks are behind us, and that the challenging affordability picture may begin to improve. We’ve seen record-high new construction occurring in the multi-family space, which is creating more units , helping to reduce competition and in turn helping to ease prices.”
Rental vacancy rates have also reached their highest point since early 2021 — and, at 6.4% in the first quarter of this year, are approaching the 7.2% rate that was “the 2013-2019 norm,” Realtor.com said.
(Realtor.com is operated by News Corp (NWSA) subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a subsidiary of News Corp.)
Weighing on inflation
Slower rental growth is also important to inflation watchers, since shelter makes up about a third of the consumer price index. The most recent inflation data from the Labor Department showed consumer prices rose 0.4% between March and April, with housing costs contributing the most to that increase.
But Realtor.com’s “monthly data is based on median asking rents rather than survey responses, which are used in the CPI Index, so CPI data lags behind what we’re seeing,” Hale said in a statement. “The data suggest that easing in the cost of shelter is ahead in future CPI reports. While this could take until 2024 to play out significantly, it will be welcome news for renters and for overall inflation.”
Rents typically rose about 3% annually before the pandemic, one researcher previously told MarketWatch, so tenants have indeed faced bigger-than-usual hikes over the past few years.
Importantly, the data shows US residents with the lowest incomes may be struggling the most with higher prices.
In 2019, 46.3% of renters were considered “cost burdened,” meaning they spent more than the recommended 30% of their income on rent and utilities, researchers with the US Census Bureau said in March. That share hit 49% in 2021. The percentage of renters who spent half or more of their income on housing, meanwhile, jumped from 23% to 25.4% in the same period.
But renter households in the lowest income quintile — people earning less than approximately $27,500 — “had a median cost ratio of 62.7% in 2021,” meaning half of those households were putting more than 62.7% of their total household income toward rent and utilities, the researchers said.
The lowest-income households also had the highest percentage-point increase in their median-rental-cost ratio of all income groups between 2019 and 2021, rising 3 percentage points from a previous level of 59.7%.
-Emma Ockerman
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05-19-23 1032ET
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