Globally, rent prices have shown a downward trend since the pandemic began, but surprisingly, in some areas, rent has increased. With summer approaching, rental prices might see some recovery; however, overall, they remain lower compared to a year ago and significantly down from the pandemic's peak.
According to a recent report by Realtor.com®, the median rent in April across the 50 largest U.S. metropolitan areas was $1,723, an increase of $16 from March, aligning with typical seasonal trends. Yet, compared to the same period last year, the median rent has decreased by $12, marking the ninth consecutive month of year-over-year declines. Furthermore, the current median rent is $33 lower than the national peak rent recorded in August 2022.
Texas's capital, Austin, experienced the largest rent decrease, with renters paying a median rent of $1,494 in April, down 11.5% from the pandemic peak in September 2022. Renters moving in now can save $195 monthly. However, despite the drop, Austin's April rent remains $260 higher than it was five years ago before the COVID-19 outbreak.
Realtor.com economist Jiayi Xu noted in her analysis, "Given the influx of new multifamily housing entering the southern market, it's not surprising that Austin renters are experiencing the most relief." Austin renters also benefit from rising vacancy rates. Xu predicts that even during the typically higher-priced spring season, Austin rents should ease.
"Austin is unlikely to reach a new rent peak in 2024," Xu stated. "Even with a sharp increase in rents, it will not hit new highs in 2024, underscoring how much Austin's rents have declined."
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Besides Austin, cities with the largest rent drops include Las Vegas (-11.1%), San Francisco (-9.9%), Charlotte, NC, and Nashville, TN. Las Vegas ranks second in rent declines, with current renters saving $184 monthly compared to the peak rent of $1,665 in June 2022, down by 11.1%.
San Francisco ranks third in the fastest rent-declining cities. Although rents in San Francisco remain the highest among the top three, renters can save $303 monthly compared to the July 2022 peak. For San Francisco residents, there's more good news: it is the only city where rent levels are lower than pre-pandemic levels.
Explaining why rents in the traditionally expensive San Francisco have fallen significantly, Xu said, "The rise of low-cost tech markets and the tech industry's slowdown have greatly impacted San Francisco, driving down rent prices."
In stark contrast, the Midwest has seen rents surge. Indianapolis ($1,334), Milwaukee ($1,671), and Minneapolis ($1,529) have experienced the largest rent increases, reaching new highs since March 2019.
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The primary reason behind this phenomenon is the abundance of employment opportunities in these areas. Xu noted, "The robust labor markets in these metropolitan areas are likely a significant driver of accelerating rent growth." These cities have unemployment rates slightly below the Midwest's 3.9% and the top 50 cities' 3.8%.
Besides the strong labor market, housing supply in these areas is relatively scarce, further driving up rents. Xu explained, "The completion rate of new multifamily housing has been growing at a relatively slow pace, helping to keep rental vacancy rates low."
Rents in three other Midwestern metropolitan areas—Cincinnati ($1,354), Cleveland ($1,210), and Chicago ($1,834)—are also approaching historical peak levels. If this upward trend continues, rents might hit record highs this summer.
Although current rents are decreasing annually, significant drops in the future are unlikely. Xu cautioned, "While the year-over-year change in asking rents tracked by Realtor.com has been negative since last August, this downward trend appears to have bottomed out in February. Slower rent growth could make it harder to further improve overall inflation rates, complicating the Federal Reserve's policy decisions and highlighting the need to increase housing construction to alleviate supply shortages."
