Skyrocketing rental rates may finally have cooled demand for rentals.
Key Details
- The rental market is beginning to slow down after last year’s fast-paced market. The drop in demand could signal the beginning of the end for high inflation.
- Demand for new leases decreased during the third quarter, property management company RealPage found. Quarter three typically had strong numbers.
- The drop in demand doesn’t necessarily reflect more affordable rentals coming available, but rather more people staying put.
Why it’s news
Rental prices have remained high this year, causing housing shortages for many.
Pew Research found that 49% of Americans have trouble finding affordable housing. As home prices and mortgage rates remain high, more potential home buyers are deciding to wait on purchasing a home. While some are able to remain in their current living situation, others look to rent temporarily.
The influx of renters has caused shortages of available renters, and landlords have subsequently increased their prices.
In August, the average monthly rent in the U.S. was more than $2,000. Despite worryingly high rent prices, the cooling market could bring lower prices, though not quickly.
“Rent growth will likely slow further as the Federal Reserve continues to raise interest rates,” says Redfin economist Taylor Marr. “Higher interest rates impact the rental market because they put a damper on spending power in the economy as a whole, including renters’ budgets. Growth in rents is also likely to be slowed by a boost in rental supply. There are nearly a million rental units under construction that will hit the market in the coming months and years.”
