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Rent: Rent for single-family homes and apartments has been rising, but it has been happening very slowly.
Consumers are being squeezed by inflation, while landlords have been losing pricing power.
Growth
For the tenth straight month, rent growth slowed in November, rising just 3.4% compared to the pace in November 2021.
It is the weakest gain in 19 months, according to Realtor.com.
The 50 largest urban markets had a decrease in the median asking rent, which fell to $1,712.
It is down $69 from the peak in July and $22 from October.
Realtor.com’s chief economist, Danielle Halle, issued the following statement:
“Many Americans’ budgets are being pulled in multiple directions as the holidays approach, bringing a more typical season cooldown to the rental market that we haven’t seen in the last few years.”
“Despite this recent relief, renters will continue to be challenged by affordability in 2023, with rents forecasted to hit more record highs.”
Market
The amount of rent relief varies by market.
For instance, rentals in the Sun Belt increased by 0.9% annually while rents fell for the first time in almost two years in areas like Austin, Texas, and Jacksonville, Florida.
Rents are rising in Indianapolis and Kansas City, respectively, by about 10% and 9%, making the Midwest markets less affordable.
Despite the fact that the Realtor.com research looks at all rents, a separate report from October that concentrates on single-family rents portrayed a similar picture.
According to CoreLogic, single-family rent growth dropped to 8.8% from October 2021, which saw the slowest pace of appreciation in more than a year.
It is still three times higher than the pre-pandemic rate.
Although rents usually decrease in the fall, the rates in 2022 were slower than usual.
Homes and apartments
Due to a lesser supply of apartments than in single-family homes, single-family home rents increased more quickly than those of apartments.
In addition, during the early years of the pandemic, there was a greater demand for single-family homes in the suburbs.
Most of the tenants have remained put.
In the meantime, the Sun Belt is still seeing high demand.
For instance, Miami, Orlando, and Florida had the highest single-family rents, which were up 16% (in Miami) and 15.5% (in Orlando and Florida) from the previous year.
Read also: Southern California Brokerage Joins Better Homes And Gardens Real Estate
Construction
Homebuilders are still expanding the market for homes built for rent, but slower rent growth may already be having an impact on multi-family buildings.
Multi-family building permits decreased more than expected (18%) in November compared to October, according to the US Census.
Bleakley Financial Group’s chief investment officer, Peter Boockvar, said:
“I have been hearing anecdotal stories of multi-family projects getting canceled because the numbers no longer work with the still elevated cost of construction, the sharp rise in funding rates, and the slowing pace of rent growth.”
The factors indicate a more pronounced decline the following year, along with a high degree of ongoing building.
According to Robert Dietz, the National Association of Home Builders’ senior economist, nine hundred thirty-two thousand multi-family units were under construction in November.
The number was the highest since December 1973.
“We are forecasting declines for apartment construction in 2023 due to the large amount of supply in the construction pipeline, as well as tightening commercial real estate finance conditions,” wrote Dietz after the November home construction report.
According to a study published in November by the Commerce Department, single-family house construction in the US has reached a 2-year low.
Additionally, the research noted that as rising mortgage rates continued to cool the housing market, permits for new buildings plummeted.
References:
Rents are now rising at the slowest pace in 19 months
Higher mortgage rates depress US single-family housing starts, building permits
