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According to a new study from Rent., after nearly two years of constant rent growth, the national median rent price was less in May than it was a year ago. The -0.57% drop in yearly prices marked the first time prices went negative since March 2020.
Yearly rent growth has been decelerating for nine months now, registering single-digit growth in each survey period since September 2022 after nearly a year of double-digit increases from October 2021 through August 2022. Since September, yearly growth has slowed from just under 9% to last month’s 0.30% rise—the smallest increase in 37 months. Over the last nine months, yearly increases have averaged 4.32% and have remained below 2.5% in each of the last five months. Yearly changes peaked at more than 17.5% in March 2022.
Monthly rent changes likewise changed directions in May, rising 1.44% since April. Short-term changes have been negative in six of the last nine months since rents peaked in August 2022 and have averaged -0.31% over that time. May’s increase was less than the last recorded monthly increase of 1.77% in March but larger than the 1.23% increase recorded in November 2022.
The national median rent is now $1,995, an increase of $28 over April’s price. Rents peaked in August of 2022 at $2,053 and are down -1.38% since then. Rents reached as low as $1,937 in February 2023, a -5.65% change from August’s peak. Over a two-year period, rents remain elevated, rising 15.79% since May 2021 while adding over $270 to monthly rent bills.
The reversal in monthly price changes may foretell a return to increasing prices as the typical high season for rent renewals and new leases kicks into full swing. Broad trends across the rental industry, including new inventory and demand below seasonal norms, have driven price slowdowns in recent months and could continue to temper growth going forward.
However, monthly decreases have been shrinking since October 2022. May’s trends suggest a potential bottom to recent rent price declines and a return to characteristic price patterns.
National Rent Price Trends
Yearly price changes registered negative for the first time since March 2020. Rents in May were down by -0.57% compared to this time last year. Yearly changes have come in below 5% in each of the last six months and below 10% every month since September 2022. Year-over-year rents increased by double-digit numbers from October 2021 through August 2022, averaging 14.65% over that time and peaking at 17.54% in March 2022.
On a monthly basis, rents are up 1.44% from April to $1,995. Rents peaked in August 2022 at $2,053. April’s price is down 1.38% from that high mark. Since rents began moderating, it has averaged monthly declines of one-third of just 1%. The most recent low came in February 2023 when the median rent was $1,937. May’s price represents a 3% increase from that point.
Prices have also fallen on a monthly basis in six of the last nine months. May’s increase is the second-largest change over that time, behind March’s 1.77% price hike.
State Price Trends
At the state level, 66.67% of markets saw positive yearly rent growth in May, down from nearly 80% of markets in April. Increases continue to be greatest in the South and Midwest, with New Hampshire and New York being the only metros outside those regions to show growth among the 10 highest gainers.
A third of markets were down year-over-year, led by decreases in the Mountain West where rents increased sharply early in the pandemic, including Idaho, Nevada, and Arizona. Neighboring Washington state, and Oregon also contributed to monthly declines among the largest losers.
Monthly changes were split similarly with 64.29% of states increasing in price and 35.71% registering declines.
South Dakota again led yearly increases with 26.55% growth. Four other Midwestern states, including Iowa, North Dakota, Nebraska, and Michigan, also saw yearly increases among the largest gainers. Mississippi registered the second-largest yearly increase at 25.15% and was joined by southern neighbors Arkansas and Alabama. In the Northeast, New York rose 12.92%, along with New Hampshire, which rose 9.7% year-over-year.
Among the 10 states with the highest year-over-year rent growth, the ones that demonstrated increases above 8% are:
- South Dakota (+26.55%)
- Mississippi (+25.15%)
- Iowa (+17.95%)
- New York (+12.92%)
- North Dakota (+12.51%)
- Arkansas (+11.75%)
- Nebraska (+10.19%)
- New Hampshire (+9.70%)
- Alabama (+8.94%)
- Michigan (+8.86%)
Year-over-year State Increases
Yearly declines in May were led by Mountain West states that saw an early influx of pandemic-related migration. Idaho and Nevada, along with the Pacific Northwest’s Washington, each saw yearly declines greater than 5%. Arizona also saw a decline of just over 3.50%, while Utah declined nearly 1.5%. Oregon, another Pacific state, declined by nearly 1%.
Of the 10 states that saw the largest yearly decreases, six were in the West, three were in the South, and one was in the Midwest.
The states that saw the largest yearly decreases are:
- Nevada (-7.46%)
- Idaho (-6.90%)
- Washington (-5.37%)
- Texas (-3.98%)
- Arizona (-3.57%)
- Oklahoma (-3.19%)
- Utah (-1.41%)
- Illinois (-1.22%)
- Maryland (-1.13%)
- Oregon (-0.94%)
Metro Area Rent Price Trends
Among the 50 most populous metropolitan areas, the South and the Midwest dominated the list of largest gainers. Among the top five largest gainers, four were from these two regions. In a change from recent months, however, among the second five largest gainers, three were from California.
This correlates with rent decreases in the Mountain West states, and Rent.’s own migration data that shows while many renters early in the pandemic fled the West Coast for locales in the Mountain West, a significant number are starting to return.
The Providence, RI, metro area saw the most significant yearly increase again this month at 17.44%, while Raleigh-Cary, NC, continues to show strong rent growth as it has for several months. Midwestern metros Kansas City, MO, and Minneapolis saw the second and third highest increases in this study with growth of just above 13% and just under 9%, respectively. In total, 16 metros saw yearly growth above 4%.
Reflective of state-level trends, several Mountain West metros were among the largest decliners, including Las Vegas, Phoenix, and the Pacific Northwest’s Seattle. But it was the South that saw the greatest relief in May.
After recent double-digit increases, Austin, TX, took the spot for the highest decrease this month at 20.76% New Orleans follows closely behind with a 20.42% decrease year-over-year, and Houston, which dropped nearly 8.5%. Birmingham, AL, Memphis, TN, and Oklahoma City rounded out the top 10 largest losers with declines of less than 6% each.
The following metro areas have experienced the greatest increase in rent prices year-over-year are:
- Providence-Warwick, RI-MA (+17.44%)
- Kansas City, MO (+13.20%)
- Minneapolis-St. Paul-Bloomington, MN-WI (+8.97%)
- Raleigh-Cary, NC (+8.05%)
- Charlotte-Concord-Gastonia, NC-SC (+7.65%)
- San Jose-Sunnyvale-Santa Clara, CA (+7.59%)
- Hartford-East Hartford-Middletown, CT (+7.47%)
- Columbus, OH (+6.81%)
- Los Angeles-Long Beach-Anaheim, CA (+6.20%)
- Riverside-San Bernardino-Ontario, CA (+5.97%)
Renters now have more leverage to negotiate their lease renewals
With many American's leases up for renewal, many are most likely expecting a lease with a higher monthly rent. But with the market cooling, some 48% of landlords surveyed are not planning to increase rent prices to avoid turnover, according to a new study from Avail.
Another side effect of the market cooling is that renters are negotiating their rents with a higher success rate—roughly 25% were successful, especially if they lived in the property for several years. Often a discount goes further if the renter negotiates a longer lease.
An estimated 72% of renters don't believe they'll own a home
As interest rates creep up and housing inventory remains low, many Americans do not see themselves buying a home despite homeownership being a goal to 85% of respondents. With rents increasing as well, 1 in 4 renters says they spend 50 percent or more of their income on rent.
Some 71% of renters reported they are now shifting priorities to being debt-free and having a good retirement fund (66%), instead of saving for a down payment.
To read the full report, including more data, charts, and methodology, click here.
