Rent Is Dropping in the U.S. Should You Lock in a New Lease Now?

Should you take advantage of lower rents?

If you’re looking to move or rent a new apartment, now might be the time to do it. According to recent reports, rents are dropping in many parts of the United States. This could be a great opportunity for renters and those looking for a new place to call home. But before you sign on the dotted line, let's take a look at whether it's worth locking in a new lease now.

The new reality for renters

The median rent in the U.S., similar to the price of homes, hit an all-time high of $2,053 in the summer of 2022. Since then, the median monthly rent has dropped to $1,978. Rents from November to December of 2022 decreased by 1.41% but are still 4.77% higher than the previous year.

Rents skyrocketed after the pandemic began, as demand outpaced supply and more people began to work from home. Supply chain issues, steady demand, the war in Ukraine, and economic uncertainty led to iInflation hitting a high of 9.1% this past summer. The latest inflation numbers have dropped, but are still at elevated levels. The cooling of the housing market, increased supply, and lower demand has impacted rents, giving an excellent opportunity for anyone looking to rent an affordable apartment or house.

So what does that mean for you?

There are several factors that can determine how much of a discount you can get when renting right now. Depending on where you live and the availability of apartments in your area, you may find that rent prices are still high or you may find that your dream apartment is suddenly within financial reach.

Many of the price drops have been based on which part of the country you live in. Ten states saw rent prices decrease, with four of the largest decreases in the West (Idaho, Nevada, Arizona, and Oregon). Among the largest 50 cities in the U.S., 14 saw rent decreases while cities like Salt Lake City and Raleigh-Cary, North Carolina saw increases of 29.8% and 24%, respectively.

What are the advantages of locking in a lease now?

If rent prices in your area have dropped significantly, you can guarantee yourself lower monthly rent payments over an extended period of time, typically one year, if you lock in a lease now. If rental prices go up again, your rent will remain unchanged until your lease expires (unless otherwise stated).

Even if rental prices rise significantly over the next few months or years, you’ll still be able to enjoy lower rates until your current agreement runs out. The winter months typically have slower demand before picking up again in the spring and summer, so it is possible prices may go back up.

What are the disadvantages?

To combat high inflation, the Fed raised interest rates eight straight times since starting to raise them in March 2022. This has led to higher borrowing costs, which has impacted the economy, stock market, and the housing market. The Fed has projected that interest rates will hit 5.1% by the end of the year, which is another quarter percent raise from its current rate.

It is possible that rents will continue to go down as the higher interest rates and the slowdown of the economy further impact the rental market. If you lock in a rate now, you will be paying more if rents do continue to decrease. Ultimately it is important to do your research and understand the rental trends in your neck of the woods before signing on the dotted line.

Renting during this time of economic uncertainty can seem daunting; however, it is possible to take advantage of lower rents if you know where to look and what kind of deals landlords are offering. By researching different areas and finding out rental trends in their area, renters can benefit from locking in a new lease while rental prices have dropped. However if they continue to drop, you may be locking yourself into paying a higher amount. Whether it’s finally getting that dream apartment or simply saving money on monthly payments over time; taking advantage of dropping rents could give savvy renters more bang for their buck!