There’s no question that rental prices remain near record highs across the nation. But the worst may be over for many shell-shocked tenants who have been hit with significant rental hikes.
The median rent in the top 50 metropolitan areas fell for the first time in nearly a year, dropping $10 off a peak reached in July, according to a recent Realtor.com® report. However, rents were still higher than they were a year ago, at a median $1,771 a month, although this was the first time in the past 13 months that they rose only by single digits. Rents were up 9.8% year over year in August.
The minor dip may signal the return of seasonal slowdowns, formerly predictable periods where rents fell in the fall, prior to the red-hot, COVID-19 pandemic boom market. However, the slight downturn isn’t exactly cause for celebration. Rents are still well above where they were before COVID-19. And last month’s annual hike is three times as high as the one seen in March 2020.
“Affordability is still a very big challenge for renters,” says Realtor.com Economist Jiayi Xu. “Inflation is still high, and renters are still feeling the stress of higher costs.”
Many tenants are struggling with higher rents
The yearlong rise in rents and housing costs, coupled with the added squeeze of inflation, has left the average American renter in a bleak situation. While wages grew by 5.2% over the same period, the cost of goods increased by more than 8%, eating away at any potential gains.
At the same time, households are putting higher percentages of their income toward rent. The problem is particularly pronounced in coastal cities, which made up the entirety of the least affordable metros in this month’s report.
Miami, which became a pandemic hot spot, continues to lead in unaffordability. The median rent in that metro amounts to over 46% of the typical household income. On a statewide basis, Florida and California had six of the nine most unaffordable markets.
Rent affordability also continued to drop in Northeastern metros such as New York City and Boston, as renters have returned to the cities after an early pandemic exodus. The middle of the country continues to be the most affordable place to rent. Oklahoma City was the most affordable of the 50 largest metros in August with a median monthly rent of $973.
Chicago sees staggering rent hikes
It’s been almost a given that many Miami renters are struggling with fast-rising rents, which rose 16.7% year over year in August. The South Florida city has had the highest year-over-year growth rate in rents for the past 10 months among the 50 largest metros. It lost that dubious honor to historically affordable Chicago, which saw its year-over-year rents climb by nearly 25% in August.
Scott Curcio, a real estate broker at Coldwell Banker in Chicago, notes that the city’s real estate market is a patchwork of neighborhoods all rising and falling at different times. However, he attributes the growth in rents to a somewhat counterintuitive cause.
“We’ve seen a lot of folks renew their leases,” he says. “A lot of buyers … didn’t find the property they were looking for and got to the point where they had to renew their lease. As such, you haven’t seen a lot of inventory that should have come up for rent come back up because people were staying put.”
Boston had the second highest year-over-year rent growth in August, at 22.8%, followed by New York, at 18.9%.