Rental demand is dropping as renters hit a tipping point with the high price of living.
- As demand for rentals gradually declines, landlords are forced to cut back on record high rents.
- This move is a sudden change from just a few months ago when prospective tenants were scrambling to find any rental at all.
- Applications for rentals are decreasing as renters grow tired of high prices outside their budgets.
Why it’s news
Renters struggled to find affordable housing just a few months ago. Landlords hiked up prices due to a combination of greater expenses and high demand.
The high rental demand was in part caused by low housing inventory. Potential homebuyers were unable to find a home in their budget, pushing them toward rentals. As more renters flooded the market, rentals became scarce.
One cause for the drop in demand is younger people choosing to stay at home rather than strike out on their own. Without affordable housing, it can often be the most cost-effective option. Some are also choosing to have multiple roommates.
Rents are down from their peak at the beginning of this year, but prices still increased 7.5% from September last year, Apartment List found. Typically, rental demand decreases this time of year, but the preliminary data shows a more dramatic drop than typically expected.
Rental prices aren’t just a concern for those apartment hunting. Those currently renting have cause to worry about potential increases. While homeowners can expect to pay the same amount over long periods, renters may see a yearly increase.
While prices keep rising, wages aren’t rising with them. A report from real estate company Zillow found that a person making the average hourly amount would need to work at least 64 hours a week to pay the typical monthly rent in September.
This is further complicated by the fact that renters typically work less-stable jobs compared to homeowners.