Rent prices are a constant push and pull between the tenant and the homeowner; over the last half-decade, the market has unequivocally favored the latter as a shortage of affordable rental housing fueled competition for whatever became available.
In certain expensive cities like New York, the cost of renting a one-bedroom apartment hovered at a record $5,000 throughout 2022.
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Both renters and those looking to buy have anxiously been anticipating a turn in the market and, according to the monthly rental market report from Realtor.com, it may have finally come.
Here's How Much Renting Costs In May 2023
For the first time since 2020, year-over-year rent prices have dropped in the U.S. The median cost of renting anything from a studio to a two-bedroom apartment in the country's 50 largest cities is now $1,739 — a 0.5% decrease from a year ago and $38 less than the $1,777 peak in July 2022.
The decline was driven by larger properties while prices for smaller and more affordable apartments are still on the rise — the $1,463 median for a studio is a 2% or $28 increase from a year ago. At $1,628 a month, the cost of renting a one-bedroom is a 0.4% or $6 increase from 2022.
The 2% or $10 drop in prices for a two-bedroom apartment ($1,923 median) is the true indication that demand is starting to wane as renters looked to combat rising prices by locking in existing leases or "scaling down" to smaller places.
"This is yet another sign that rental-driven inflation is likely behind us, even though we may not see this trend in official measures until next year," Realtor.com's Chief Economist Danielle Hale said in a statement. "Although still modest, a decline in rents combined with cooling inflation and a still-strong job market is definitely welcome news for households."
Renters May Finally Get More Power
Any decreases are small and reflect a "shuffling around" toward smaller properties rather than a true improvement in affordability — compared to the same month in 2019, rent prices in May 2023 are up $344 or 24.7%.
While home values continue to trend upward in the long term and continue to exacerbate inequalities between renters and owners, Realtor.com predicts that rent prices will drop by a total 0.9% by the time the year is over and give more power to renters (particularly those looking for larger properties) for negotiating down prices in the near term.
By continuously raising prices, landlords can also create a situation in which they have a smaller pool of qualified renters to choose from — some will then choose to drop prices and thereby also shift the rental market.
At a respective 5.6% and 4% decreases, Austin in Texas and Florida's Tampa were the two metro areas to see the biggest decreases in rent prices. Regionally, rent prices in the West saw the biggest drop in rent prices at 3%. Prices fell 1% in the South while continue to increase by 4.5% in the Midwest.
"Looking forward, we expect to see a continued, albeit small, year-over-year decline in rental prices throughout the remainder of the year," Hale said. "Renters may find themselves with more bargaining power and may have better luck finding an affordable unit this year."
