The epidemic has led to a meteoric rise in rental prices and a severe shortage of supply is not helping. According to the Realtor.com monthly rental report released today, the nation’s average rental price reached its latest new high of $ 1,849 in May, representing a 26.6% increase from 2019 before the epidemic began.
A key factor in the ongoing rent growth is the lack of supply, as rent vacancies that are already in low trend have taken a sharp dive during the epidemic. These trends are amplified in large cities that tend to attract younger residents, many of whom are in the early stages of their careers and are looking for flexibility in their living conditions.
While May marks the 10th straight month of double-digit annual growth in national rents, the increase is the smallest since September 2021, giving tenants a light look at the end of the tunnel.
“There is no question that tenants are facing sky-high prices,” said Daniel Hale, chief economist at Realtor.com. “And rising inflation reflects price jumps on both rents and daily costs. Many renters are feeling the pressure on their finances. Still, our May data suggests that rent growth is starting to lose some steam, as revenues cannot continue even in a strong job market.
Hale added, “While rental growth is historically high, rates have been steadily cooling since January, with the pace of the 2021 fever slowing. In some good news for tenants, the slowdown increased in May, meaning that if these trends continue, last month’s revenues will exceed $ 2,000 this summer.
For Americans looking for rental units that are available in their budget, May Trends offer bitter news. On the one hand, national rents posted the smallest gain (+ 15.5%) year-on-year since September 2021, moderating from the January high (+ 17.3%) for the fourth consecutive month. As a result, this summer, rents have taken a step back from their previous projection of $ 2,000. In fact, if rental growth continues to cool, typical asking rentals will not reach that milestone until next year.
In addition, with the forecast that the supply of residential housing for sale will accelerate in the second half of the year, an increase in first-time buying opportunities may take even more pressure from rental demand and prices.
Still, dealing with inflation, rent affordability remains a significant challenge for many tenants across the country. Average rental prices continue its record-breaking series, reaching new highs ($ 1,849) for the 15th consecutive month, and up 26.6% over May 2019 before the epidemic began.
Additionally, all unit sizes post double-digit rental price gains year-over-year: studios, 16.9% to $ 1,530; One-bedrooms, 15.2% to $ 1,708; And two-bedrooms, 14.8% to $ 2,076. Rising inflation further exacerbates economic pressure on the monthly budget of households, as higher rental costs and regular expenses offset income growth.
Real estate has historically come at a premium and is a highly desirable alternative to renting in these areas. According to the Census Bureau data from the first quarter of 2022, rental vacancy rates have decreased compared to large metro areas inside (5.7%) and outside (6.7%).
In May, rents grew year-over-year in all 50 large metros, and at a faster pace than the national rate for nearly half (21) of these markets. The largest annual rental price gains were recorded in Miami (+ 45.8%), Orlando, Florida (+ 28.4%), Providence, Rhode Island (+ 23.8%), San Diego (+ 22.7%) and Tampa (+ 22.4%).
Realtor.com’s analysis highlights the relationship between rental availability and prices in large markets. On one end of the spectrum, the leading tech hub had the nation’s fifth-highest rent ($ 2,889) in May, after Boston posted a 2.4% vacancy rate in 2022-Q1. Conversely, renters can find more affordable options in relatively small and less populated secondary cities.
Of the 10 areas with the highest vacancy rates, nine are among the lower-rent rental markets in May, led by Indianapolis, which has a significantly lower overall rent ($ 1,275) than Boston and a higher vacancy rate (10.9%).