The rental market in the United States has witnessed a significant decline in rents for the third consecutive month. This decline can be attributed to the rising supply of apartments throughout the country.
According to a recent report from Realtor.com, the median monthly rent dropped by 1% in July compared to the previous year, settling at $1,759. Studio apartments were available for $1,445 per month, while one-bedroom units had a median rent of $1,642.
The decrease in rental prices is welcome news amid the current high inflation rates affecting the U.S. economy. Housing costs have been a primary driver of this inflationary pressure. To combat this, the U.S. Federal Reserve has raised its benchmark interest rate 11 times in the past 12 policy meetings.
Despite the recent decline, rents have not yet returned to pre-pandemic levels. As of July 2023, rental prices are still nearly 25% higher compared to July 2019.
Among various unit types, two-bedroom apartments experienced the highest annual increase in rents. The median rent for a two-bedroom unit reached $1,948, reflecting a growth of almost 27% from the previous year.
“Renters in many areas are now spending slightly less on rent relative to their overall income, giving their budgets a little more breathing room at a time of stubborn inflation and ongoing affordability concerns,” stated Danielle Hale, chief economist at Realtor.com.
This downward trend in rental prices, combined with an increase in apartment supply, is likely to provide some relief to renters and alleviate concerns about housing affordability.
Rents become more affordable
According to recent data, there has been an increase in the construction of multi-family homes, such as townhomes and apartments. This has also led to a rise in vacancy rates. As a result, rent prices are experiencing downward pressure, providing renters with much-needed stability in their housing expenses.
Affordability on the rise
Overall, rents have become more affordable this summer. In July, individuals with the average household income only need to allocate around 26% of their earnings towards renting, compared to 26.5% the previous year.
This positive change can be attributed to a combination of declining median rents and rising median household income, as stated in the report.
Most affordable markets
The most affordable rental markets are located in the Midwest, with Oklahoma City taking the lead. In July, renters in this city were spending only around 18% of their median household income on housing.
Least affordable markets
On the other hand, some cities have proven to be less affordable for renters. These include Miami, Los Angeles, San Diego, and New York City.
In Miami, for instance, the median monthly rent reached $2,455 in July. Renters in this city would have spent 44% of their monthly paycheck on rent during that period.
In New York City, where the median monthly rent was $2,859 in July, renters would have allocated 37% of their income towards rent.
It is clear that while rents have become more affordable overall, certain regions still present challenges for renters in terms of affordability.
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(Note: Realtor.com is operated by News Corp subsidiary Move Inc., and is a unit of Dow Jones, also a subsidiary of News Corp.)
