Rent Growth Is Slowing, and That's Good News for Struggling Home Buyers and Renters
- Rents have been sky-high on a national level this year.
- Decreasing rents could make home buying a less appealing prospect.
Finally, there's some much-needed relief in the housing market.
At a time when many consumers have been facing skyrocketing prices at the pump, supermarket, and just about everywhere, rents have been soaring, thereby adding to that burden. But Realtor.com just released some positive news regarding rents.
In September, rent growth fell to its lowest annual pace since June of 2021. And the median U.S. rental price declined from the previous month for the second month in a row.
Some much-needed relief for renters
During the pandemic, many landlords were barred from evicting tenants who couldn't pay their rent. That caused landlords to fall behind on their own expenses. And so once the general economic situation improved and the demand for rentals started to soar, landlords understandably took advantage by raising prices.
That's been a source of struggle for tenants, especially since, at this point, the rental assistance programs that were put into place earlier on in the pandemic have largely run out. But now that rent growth is slowing, tenants may be able to breathe a sigh of relief.
Home buyers could benefit, too
Part of the reason rental demand has been so strong over the past year and change is that home prices started soaring during the latter part of 2020 when mortgage rates plunged to record low levels and housing inventory started to shrink. Because it's been so expensive and difficult to purchase a home, many would-be buyers turned to rentals instead, thereby giving landlords even more leeway to charge extra.
But now that rent prices are cooling, it could drive some home buyers out of the market for another year or two. That could, in turn, open things up for remaining buyers who are really eager to purchase a place of their own.
Plus, if rent prices start to fall, home values could start to follow suit. And that would clearly be a good thing for buyers, especially at a time when it's gotten so expensive to take out a mortgage.
Will rent prices continue to fall steadily?
That's yet to be determined. Many financial experts have been sounding warnings about an impending recession. If economic conditions decline in 2023, it could drive more potential home buyers out of the market, thereby driving up rental demand. And any time there's a situation where demand greatly exceeds supply, prices can rise.
But that's not guaranteed to happen. In fact, if a recession hits, some people may be inclined to save money on rent by moving in with family members or crashing on friends' couches for months on end. So we could see a decline in rental demand, which would, in turn, drive prices downward.
All told, it will be interesting to see what the median U.S. rent ends up looking like come this time next year. In the meantime, those looking for a rental can take some comfort in the fact that rent growth seems to be cooling off, and that the days of exorbitant rents may soon be behind us.
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