Eleven major metropolitan areas in the United States saw median rental rates decline last month, according to an analysis from real estate brokerage Redfin, as economic headwinds and inflationary pressures discourage renters from moving.
The company found that the median nationwide asking rent rose 7.8% year-over-year, constituting the second consecutive month of single-digit increases following nearly one year of double-digit gains. The typical renter is now paying $1,983, marking a 0.9% month-over-month decrease from September.
“Demand for rentals is slowing because economic uncertainty is prompting many renters to stay put, and persistent inflation is shrinking renter budgets. That’s causing rent growth to cool,” Redfin Deputy Chief Economist Taylor Marr said in a press release. “There are signs that inflation is starting to ease, but it will likely be a while before renters see meaningful relief given that rents are still up more than wages.”
Milwaukee, Wisconsin, saw a 17.6% decline in rental prices between September and October, representing the largest decline of any other major metropolitan real estate market. Rents in Minneapolis, Minnesota, fell 7.8%, while those in Baltimore, Maryland, and Seattle, Washington, decreased 3.2% and 2.7% respectively. Cities in the Midwest and South saw the most rapid increases, with prices in Oklahoma City, Oklahoma, surging 31.7% month-over-month as prices in Raleigh, North Carolina, and Cincinnati, Ohio, increased 21% and 17% respectively.
Only five metropolitan areas saw rent decline during the month of September. New York City, New York, currently maintains the country’s highest median rent at $4,068.
Earlier reports indicated that soaring real estate prices caused some would-be homebuyers to search for apartments rather than contending with elevated purchasing costs, introducing upward price pressure in some rental markets. Home prices are now falling due to higher mortgage rates discouraging demand; nevertheless, affordability is also plummeting because of higher mortgage payments, according to data from the National Association of Home Builders.
The 30-year fixed mortgage rate remained below 3% for much of the past two years, according to data from government-backed mortgage company Freddie Mac. The rate has surged from approximately 3% earlier this year to more than 7% earlier this month, with most of the increases occurring after the Federal Reserve hiked target interest rates at the fastest pace in three decades.
“The housing market and affordability conditions have continued to weaken throughout the year as rising mortgage rates, supply chain bottlenecks and a lack of skilled construction workers continue to push housing costs higher,” National Association of Home Builders Chairman Jerry Konter said in a statement. “Entry-level buyers are particularly hurt, as more of them are getting priced out of the market.”
Metrics such as the National Association of Realtors’ Pending Home Sales Index have witnessed rapid declines, further demonstrating lower market interest in new home purchases. Fannie Mae, a government-sponsored enterprise which securitizes mortgage loans, predicted in an analysis last month that home prices will decline 1.5% in 2023; meanwhile, estimated increases in home prices were revised from 16% to 9% for 2022. The organization noted early signs of cooling labor market pressures, which had constrained builders’ capacity to increase housing inventory, although interest rates are still projected to increase.