BAM Key Details:
- Realtor.com has released its May Rental Report, which shows a 0.5% annual decline in the median asking rent, particularly for two-bedroom units—the first annual rent decline since Realtor.com started tracking this data in 2020.
- Western markets are seeing the biggest year-over-year drops in rent, with the South close behind, while rents increase more slowly in the Midwest. Rents in the Northeast are holding steady, with increases in densely-populated metros like NYC and Boston.
The Realtor.com May Rental Report is out, showing the first annual decline in the median asking rent since they started tracking rental data in 2020.
Nationally, rental costs dropped by 0.5% year over year in May, with steeper drops in the West, followed closely by the South. Meanwhile, rents in more affordable Midwest markets continue to rise, though more slowly. Northeast rental markets have held steady.
Renters across the country are starting to see some relief from increases in their monthly rent. The median asking rent in the 50 largest U.S. metros has dropped 0.5% year over year to $1,739.
Rent prices nationwide are up $3 month over month but down $38 compared to the July 2022 peak. And, according to Realtor.com®’s 2023 Forecast Update, the annual decline in asking rents will continue—averaging -0.9% from 2022.
In May, we saw the first year-over-year decline in rents, a sea-change from the double-digit growth that renters contended with in much of 2021 and 2022. 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. Although still modest, a decline in rents combined with cooling inflation and a still-strong job market is definitely welcome news for households.
While the nationwide dip in rents is good news for (some) renters, it’s worth pointing out that rents across the U.S. are still $344 (+24.7%) higher where they were in 2019, right before the start of the pandemic.
Plus, for renters looking to move after several years of staying in the same place, rents for their new homes will likely still be higher than what they were paying before.
Despite the decline in typical asking rents, households who may not have moved in several years are likely to see their rent increase if they’re looking for a new home.
Rents on two-bedroom units dropped 0.5%
The median asking rent for two-bedroom units fell 0.5% in May to $1,923—down $10 from the asking rent for May 2022 and $47 from the July 2022 peak.
That said, rents for larger units (two bedrooms-plus) have grown the fastest over the past four years, adding, on average, $417 or 26.7%.
Rent growth for one-bedroom units slowed to 0.4% in May, continuing the downward trend that began a couple of months prior in March. The median rent for these units was $1,628—up $6 from May 2022 and $337 (25.3%) from May 2019, but down $24 from the July 2022 peak.
Rent growth for studios in May was 2.0%, and the median asking rent was $1,463—up $28 (2.0%) from May 2022 and $262 (21.0%) from May 2019, but still $3 below its August 2022 peak. Studio rents have consistently outpaced rents for larger two-bedroom units over the last ten months.
Markets in the West see the biggest rent declines
Rent prices are seeing the biggest annual drops in expensive Western markets (-3.0%), followed closely by the South (-1.0%).
Meanwhile, rents in more affordable Midwest markets are still climbing (4.5%), though at a much slower rate compared to previous months.
Rents in the Northeast have held their ground as relatively slow improvements in new construction, combined with low unemployment rates, have kept demand high and rental supply limited. Rents in densely-populated Northeast metros like New York City (+6.8%) and Boston (+3.3%) are showing resilience as other markets adjust to increases in multifamily supply.
Top 10 metros with the biggest annual declines in rental costs:
- Las Vegas–Henderson–Paradise, NV (-6.0%)
- Riverside–San Bernardino–Ontario, CA (-5.9%)
- Phoenix–Mesa–Scottsdale, AZ (-5.7%)
- Austin–Round Rock, TX (-5.6%)
- San Francisco–Oakland–Hayward, CA (-4.0%)
- Tampa–St. Petersburg–Clearwater, FL (-4.0%)
- Dallas–Fort Worth–Arlington, TX (-3.6%)
- Sacramento–Roseville–Arden–Arcade, CA (-3.5%)
- Charlotte–Concord–Gastonia, NC (-3.5%)
- Atlanta–Sandy Springs–Roswell, GA (-3.1%)
Top 10 metros with the biggest annual increases in rental costs
- Columbus, OH (9.3%)
- St. Louis, MO-IL (7.7%)
- Cincinnati, OH (7.5%)
- Indianapolis–Carmel–Anderson, IN (7.3%)
- Louisville / Jefferson County, KY-IN (7.2%)
- New York–Newark–Jersey City, NY-NJ-PA (6.8%)
- Milwaukee–Waukesha–West Allis, WI (6.2%)
- Detroit–Warren–Dearborn, MI (5.1%)
- Richmond, VA (4.9%)
- Oklahoma City, OK (4.6%)
Realtor.com predictions for the second half of 2023
Based on the data accumulated since 2020, Realtor.com expects continued drops in the median rent, averaging a -0.9% annual decline in 2023.
Looking forward, we expect to see a continued, albeit small, year-over-year decline in rental prices throughout the remainder of the year. Renters may find themselves with more bargaining power and may have better luck finding an affordable unit this year.
Takeaways for real estate agents
If you’re seeing a decline in rent prices in your market, that could enable more of the renters in your area to save more each month toward a down payment on a home. Given a chance, help any renters with an interest in homeownership to see a clear path toward it.
Help them understand the market and their options. And encourage them to prepare and save as much as possible, so they’ll be ready to invest when they find the right home for them.