The median U.S. asking rent reached $1,964 in January, rising by 1.1% year over year, according to a Redfin report.
While rent growth was positive in January, it remains a far cry from the double-digit growth recorded during the early stages of the COVID-19 pandemic. As landlords grapple with higher vacancy rates, they don’t have the leverage necessary to command high rent prices.
Throughout 2023, yearly rent growth rates hovered between -2.1% and +2.4%, signaling that appreciation is back under control. In 2022, rent growth rates spanned a much wider spectrum of 4.8% to 17.7%, Redfin reported.
An abundance of new apartments recently hit the market, giving renters more options to choose from. Meanwhile, more apartments are under construction. Redfin chief economist Daryl Fairweather expects apartment completions to peak in 2024. As a result, vacancies ticked up to a rate of 6.6% in the fourth quarter.
Rents have stopped surging, but they also have not posted any significant declines. Amid the high mortgage rate environment, many prospective home seekers chose to postpone their purchase plans and rented an apartment instead.
Elevated demand for rental units has kept rent prices afloat, due in part to the fact that home prices have been increasing at a much faster pace than rents. Additionally, some landlords are still offering one-time price incentives to attract renters.
“There’s not a huge incentive for renters to buy right now,” Fairweather said in the report. ”Asking rents are stable, and while mortgage rates have dipped in recent months, they haven’t fallen enough to make the financial equation of homebuying feasible for many people. If you’re a renter who’s interested in buying but isn’t in a rush, there’s not much downside to waiting for mortgage rates to fall and your savings to grow.”
Buying a house in this market can make sense for more affluent buyers who can afford a large down payment and offset the price of elevated mortgage rates, according to Fairweather.
Regional differences
The median asking rent increased the most in the Midwest, jumping 4.6% year over year to reach a record high of $1,437 in January. Rent prices grew by 2.3% in the Northeast to $2,427, and by 0.6% in the West to $2,358. Asking rents remained unchanged in the South at $1,637.
The Midwest and the Northeast offered the most growth in rents because there has not been as much new construction in these regions. Landlords have less pressure to fill vacancies in these markets, Redfin reported.
