Rental Prices Continue To Come Down, but It’s Not Fast Enough for Struggling Tenants

What went up finally came down.

Rental prices fell for the third month in a row, dipping 1% year over year in July, according to the most recent rental report from Realtor.com®. And rents could continue to fall as builders continue putting up more apartment buildings expected to come online over the next year and renters are hitting their financial limits.

Even the minor decline helped a bit with affordability as tenants have been squeezed by higher rents, inflation, and more expensive gas prices. The typical tenant household put about 25.9% of their income toward rent, compared with 26.5% a year ago.

“We anticipate this downward pressure on rent prices will continue, providing many renters with much-needed stability in their housing expenses,” Realtor.com Chief Economist Danielle Hale said in a statement. “Given the current rental market momentum and seasonal trends, it will be very unlikely to see a new peak rent in 2023.”

The report wasn’t all good tidings, though. Rental prices rose $15 from June to reach $1,759 in July in the 50 largest metropolitan areas. That’s not unusual as summer is often when prices peak along with demand, as families are moving before the school year starts and college students are trying to secure housing before the fall semester begins.

Prices were still down $18 from the peak a year earlier.

“It’s very good news for renters to see affordability improved,” says Jiayi Xu, an economist at Realtor.com. “We think affordability will continue to improve throughout the year.”

Realtor.com looked at rents for studios and one-bedroom and two-bedroom apartments, condos, townhomes, and single-family homes in the 50 largest metros. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.)

Which units saw the steepest price drops?

Studios saw the first year-over-year decline in more than two years, edging down 0.4%, to a median of $1,445. That marks a turning point. The smaller, more affordable units had experienced steeper price increases as financially squeezed tenants had sought out the more affordable units.

However, the typical studio still costs 24.7% more than it did in July 2019, before anyone had heard of COVID-19.

The price of one-bedroom units ticked down 0.6%, to $1,642. Two-bedroom rental prices dropped the most, by 1.1%, to $1,948.

Where are rental prices rising and falling the most?

The places where rents soared the most over the past few years are the places where rents are now tumbling down. These tended to be the high-priced cities on the West Coast, such as San Francisco, as well as cities in the South, such as Austin, TX, and Miami.

Unfortunately for renters, though, prices are still steadily climbing in the Midwest and Northeast, where prices hadn’t risen by as much during the pandemic. The cheapest monthly rent (in the 50 largest metros) was in Oklahoma City, where tenants paid a median of $1,032 a month.

Rents fell the most in Austin, TX, where they dropped by 7.9% year over year, to a median of $1,725 a month. The metro was followed by Riverside, CA, -7.8%; Dallas, -5.6%; Orlando, FL, -5.2%; Las Vegas, -4.9%; Raleigh, NC, -4.8%; Phoenix, -4.6%; Atlanta and Charlotte, NC, -4.5%; and San Francisco, -4.3%.

“It’s not surprising to see affordability improve a little bit,” says Xu. “Prices are still very high. Renters don’t want to pay any more.”

Rents rose the most in the Milwaukee metro area, increasing 6.8% compared with last July, to a median of $1,618. Next up was Richmond, VA, 5.8%; New York City, 5.7%; Cincinnati, 5.2%; Boston, 4.7%; Indianapolis, 4.3%; Oklahoma City, 4%; Birmingham, AL, 3.9%; Louisville, KY, 3.6%; and St. Louis, 3.5%.

These areas are generally attracting workers from other parts of the country with strong job markets and reasonable costs of living.

The higher prices in Milwaukee are because there are not enough rentals to go around, says Sonya Mays, a Milwaukee real estate broker and property manager at Midwest Executive Realty.

Tenants who can’t find a home to buy are renting for longer, putting more demand on the rental market. And landlords are raising rents to meet increased costs, such as higher utility and water bills.

“It’s very difficult for some renters to move around,” says Mays. “A lot of renters are staying put because of the rental increases.”

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