New York, NY – May 16, 2023 (BUSINESS WIRE) Cost-of-living concerns are top of mind amongst Americans while rent-to-income ratios (RTI) remained elevated in Q1, according to Moody’s Analytics US State of Rent Burden report and data interactive tool. While seasonal slowness and rising multifamily inventory moderated rent growth, the number of US primary metros still experiencing higher rent burdens plummeted from 49 metros down to only five, a 91% drop from Q4 2022 to Q1 2023. RTI – the percentage of gross income a median-income tenant pays for the average monthly rent – finally cooled after more than three years of steepening rates nationwide.
“The fever is finally breaking. Since Q4 2019, 82% of metros had higher rent-burdens compared to pre-COVID because rent disproportionately rose faster than incomes,” wrote Lu Chen, Senior Economist, and Mary Le, Economist, Moody’s Analytics. “Rising mortgage rates caused many households to be priced out from homebuying and would-be buyers to remain renters. Apartment demand surged as a result and drove rates sky high. The vast majority (91%) of all metros finally caught a break from growing rent burdens in Q1, as rent growth moderated or even declined given affordability pressures and slowing migration. However, we are not quite at an inflection point yet.”
Even with this near-term relief, the cost of shelter remains significantly elevated relative to wages when compared to past decades. In 1999, just one metro was rent-burdened: New York City, with the median NYC household allocating 53.5% of their income to the average-priced apartment. Today, seven US metros fall within this designation: NYC (now 66.9% RTI), Miami (42%), Fort Lauderdale (36.8%), Los Angeles (34.7%), Palm Beach (34.2%), Northern New Jersey (33%), and Boston (32.8%).
COVID-19 only exacerbated this issue. NYC’s RTI increased 8.4% between Q4 2019 and Q1 2023. Many metros followed suit, forcing several to become “rent-burdened”, meaning the typical household pays 30% or more of their income to rent. In Q4 2022, the US became “rent-burdened” nationwide for the first time in nearly 25 years of Moody’s Analytics tracking history.
“As wage growth trails behind the cost of shelter, Americans are feeling financially distressed,” continued Chen and Le. “With rent growth projected to hover around 2% annually, national RTI will stay mostly flat for the year (29.7%). That is still uncomfortably elevated and only trailing behind last year’s broken record.”
About Moody’s Analytics
Moody’s Analytics provides financial intelligence and analytical tools to help business leaders make better, faster decisions. Our deep risk expertise, expansive information resources, and innovative application of technology help our clients confidently navigate an evolving marketplace. We are known for our industry-leading and award-winning solutions, made up of research, data, software, and professional services, assembled to deliver a seamless customer experience.
Moody’s Analytics, Inc. is a subsidiary of Moody’s Corporation (NYSE: MCO). With approximately 14,000 employees in more than 40 countries, Moody’s combines international presence with local expertise and over a century of experience in financial markets.
The median asking rent fell 0.4% in March to the lowest level in 13 months. Austin and Chicago saw the largest declines, while Raleigh and Cleveland experienced the biggest gains.
Seattle, WA – April 14, 2023 (BUSINESS WIRE) (NASDAQ: RDFN) The median U.S. asking rent fell 0.4% year over year to $1,937 in March – the first annual decline since March 2020 and the lowest median asking rent in 13 months, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. By comparison, rents were up 17.5% one year earlier, in March 2022.
“It’s similar to the cost of eggs. You can say egg prices are plummeting, but what’s really happening is they’re finally making their way back to the $3 norm instead of $5 or $6. Rents ballooned during the pandemic, and are now returning to earth.”Tweet this
The median asking rent in March was unchanged from February. It remained $322 higher (19.9%) than it was at the onset of the pandemic three years earlier, though wages increased at roughly the same pace during this time.
“Rents are falling, but it feels more like they’re just returning to normal, which is healthy to some degree,” said Dan Close, a Redfin real estate agent in Chicago, where the median asking rent in March was 9.2% lower than it was a year earlier. “It’s similar to the cost of eggs. You can say egg prices are plummeting, but what’s really happening is they’re finally making their way back to the $3 norm instead of $5 or $6. Rents ballooned during the pandemic, and are now returning to earth.”
Rents surged during the past two years because incomes increased and household formation rose as more millennials started families. But household formation is now slowing, partly because many people are opting to stay put rather than move during a time of economic uncertainty.
Rents Drop Due to Supply Glut, Inflation, Economic Uncertainty
Rents declined from a year earlier in March largely due to a surplus of supply resulting from the pandemic homebuilding boom. The number of multifamily units that went under construction and the number completed each rose to the second highest level in more than three decades in February, the latest month for which data is available. Completed residential projects in buildings with five or more units jumped 72% year over year on a seasonally-adjusted basis to 509,000, the highest level since 1987 with the exception of February 2019. Started projects in buildings with five or more units rose 14.3% to 608,000, the highest level since 1986 with the exception of April 2022.
The short-term rental market is in a similar situation. The Airbnb market is oversaturated with supply and authorities are imposing tougher restrictions on hosts in some areas, driving some owners to lower rents or sell, according to Redfin agents.
The overall rental market is also cooling because still-high rental costs, inflation, rising unemployment and recession fears are causing rental demand to ease. Rental vacancies are on the rise, prompting some landlords to cut rents and/or offer concessions like discounted parking.
“A lot of people in Chicago became landlords during the pandemic,” Close said. “Some were looking to cash in on soaring rents. Some rented out their homes because selling would’ve meant giving up their rock-bottom mortgage rate. Others tried to sell but didn’t get a satisfactory offer due to slowing homebuyer demand. Now we have a lot of rental supply, which is bringing prices down because renters have more options.”
Three factors have driven up rents in Nashville, according to local Redfin real estate agent Jennifer Bowers: investors, high home prices and a strong local job market.
“Tons of investors bought homes in Nashville and turned them into rentals during the pandemic in order to take advantage of low mortgage rates and rising rental demand—which allowed them to jack up rents. While investors have since pumped the brakes on purchases, they haven’t cut rents,” Bowers said. “Demand for rentals rose in part because skyrocketing housing prices pushed homeownership out of reach for many families. Elevated mortgage rates over the last year-and-a-half have also priced buyers out.”
The average 30-year-fixed mortgage rate is now 6.27%, down from a fall peak of 7.08%, but up from 5% in April 2022, which has sent the typical homebuyer’s monthly payment up by nearly $300 from a year ago. While home prices have started falling on a year-over-year basis, they remain more than 30% higher than they were when the pandemic started.
Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, instant home-buying (iBuying), rentals, lending, title insurance, and renovations services. We sell homes for more money and charge half the fee. We also run the country’s #1 real-estate brokerage site. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can take an instant cash offer from Redfin or have our renovations crew fix up their home to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we’ve saved customers more than $1 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 6,000 people.
For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin’s press release distribution list, email press@redfin.com. To view Redfin’s press center, click here.
New data reveals positive monthly rent growth for second month in a row
Washington, D.C. – March 08, 2023 (BUSINESS WIRE) Today, Apartments.com – a CoStar Group company – released an in-depth report of multifamily rent growth trends for February 2023 backed by analyst observations. February marks the second month in a row of positive month over month rent growth, signaling a surprisingly strong start to the year but still not enough to reverse the downward movement of annual rents.
“Nationally, sequential monthly rents rose $2.50 or 0.15% in February, marking the second month of positive rent growth after a negative streak from August to December of 2022,” said Jay Lybik, National Director of Multifamily Analytics at CoStar Group. “However, national year over year rent growth continues to decline with supply additions outstripping mediocre demand, causing instability across the rental market. If we’re able to record a few more months of positive monthly rent growth, year over year rent growth could reverse course, bringing supply and demand closer to equilibrium.”
YEAR OVER YEAR RENT GROWTH OUTLOOK
National year over year rent growth continues to remain positive, but fell to 2.9% at the end of February compared to 3.2% in January. Only two of the largest 40 markets saw their year over year asking rent expand in February – Baltimore and Philadelphia. However, the positive upward movement was in the 10 and 20 basis points range, representing a small reversal in the overall weakening rent growth picture.
INDIANAPOLIS HOLDS TOP RENT GROWTH SPOT, ATLANTA AND AUSTIN DECELERATE RAPIDLY
For the third month in a row, Indianapolis came out on top with the largest market rent growth. Several other Midwest markets are also among the top 10 rent growth leaders as new supply additions pose less of an issue in these areas. The majority of Sunbelt markets have witnessed significant pullback in rents over the past year, except for Miami and Orlando which have defied the odds and remain amongst the top rent growth leaders.
Las Vegas and Phoenix have seen a dramatic slowing of growth, rounding out the bottom of the annual rent growth ranking in February. Both markets watched year over year asking rents go from the low 20% range in Q4 2021 to negative. Additionally, Atlanta and Austin have experienced significant deceleration over the past 12 months, going from 18% year over year to barely positive in February.
SUNBELT HIGHLIGHTS WEAK RENTAL MARKET
Overall rental market weakness across the Sunbelt remains on full display in February’s month over month shift. Phoenix, Austin, Nashville, Orlando, Las Vegas and Dallas-Fort Worth witnessed either negative or barely positive movement in their rent growth, when, compared to a year ago, these markets were leading the nation in rent growth.
LOOKING AHEAD
February’s small positive rent growth offers the possibility that demand could be slowly gaining momentum in time for the upcoming spring leasing season. However, with a record number of units projected to deliver this year and 13 markets poised for new supply records, that demand will have to be substantial to halt the year over year rent declines and stabilize rents in 2023.
About CoStar Group
CoStar Group, Inc. (NASDAQ: CSGP), a leading provider of online real estate marketplaces, information, and analytics in the property markets. Founded in 1987, CoStar conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of commercial real estate information. Our suite of online services enables clients to analyze, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. STR provides premium data benchmarking, analytics, and marketplace insights for the global hospitality industry. Ten-X provides a leading platform for conducting commercial real estate online auctions and negotiated bids. LoopNet is the most heavily trafficked commercial real estate marketplace online. Apartments.com, ApartmentFinder.com, ForRent.com, ApartmentHomeLiving.com, Westside Rentals, AFTER55.com, CorporateHousing.com, ForRentUniversity.com and Apartamentos.com form the premier online apartment resource for renters seeking great apartment homes and provide property managers and owners a proven platform for marketing their properties. Homesnap is an industry-leading online and mobile software platform that provides user-friendly applications to optimize residential real estate agent workflow and reinforce the agent-client relationship. Homes.com offers real estate professionals advertising and marketing services for residential properties. BureauxLocaux is one of the largest specialized property portals for buying and leasing commercial real estate in France. Business Immo is France’s leading commercial real estate news service. CoStar Group’s websites attract tens of millions of unique monthly visitors. Headquartered in Washington, DC, CoStar Group maintains offices throughout the U.S., Europe, Canada, and Asia. From time to time, we plan to utilize our corporate website, CoStarGroup.com, as a channel of distribution for material company information.
About Apartments.com
Apartments.com is the leading online apartment listing website, offering renters access to information on more than 1,000,000 available units for rent. Powered by CoStar, the Apartments.com network of sites includes Apartments.com, ApartmentFinder.com, ApartmentHomeLiving.com, Apartamentos.com, WestsideRentals.com, ForRent.com, ForRentUniversity.com, After55.com and CorporateHousing.com.
Apartments.com is supported by the industry’s largest professional research team, which has visited and photographed over 500,000 properties nationwide. The team makes over one million calls each month to apartment owners and property managers, collecting and verifying current availabilities, rental rates, pet policies, fees, leasing incentives, concessions, and more. Apartments.com offers more rental listings than any other apartments website, and innovative features including a drawing tool that allows users to define their own search areas on a map, and a “Travel Time” feature that lets users search for rentals in proximity to a specific address. Apartments.com creates easy access to its listings through a responsive website and iOS and Android apps, and provides unmatched exposure for its advertisers through an intuitive name, strategic search engine placements and innovative emerging media.
The Apartments.com network reaches millions of renters nationwide, driving both qualified traffic and highly engaged renters to leasing offices.
