Stagnant economic growth is sapping demand for apartments, depressing rents.
The median rent for a one-bedroom unit dipped 0.8% to $1,491 in October from September, according to a report by Zumper. For two-bedroom apartments, the average rent slipped 0.7% to $1,832.
Compared with a year earlier, 61 of the 100 cities on Zumper’s list showed month-over-month rent declines for one-bedroom apartments. A total of 19 cities saw no change in average rent, while 20 saw increases.
Again comparing year-on-year, the median rent for one-bedroom apartments rose 9.2% in October 2022 against October 2021, after 12 straight months of double-digit jumps. The gain was 8.9% for two-bedroom apartments.
“This reversal of widespread price hikes is fueled by several factors, including rising vacancy rates in some markets, a return to more typical seasonal moving patterns and, above all, fear of recession,” the study said.
A recent Zumper survey showed that more than three-quarters (76.2%) of Americans say the economy is already in a recession. The economy contracted an annualized 1.6% in the first quarter and 0.6% in the second, though it grew 2.6% in the third.
No ‘Drastic’ Price Drops
“Since high interest rates and inflation continue pushing potential [homebuyers] out of the market, we’re still seeing relatively strong competition for rentals,” the rental report said. “Therefore don’t expect drastic price drops until supply and demand become more closely aligned.”
Still, “we do expect a significant amount of new supply will finally hit the market over the next six months, putting pressure on property owners to compete for residents and driving prices down even more,” the report said.
The rent-price decline represents a correction to overly inflated prices, said Zumper Chief Executive Anthemos Georgiades. “We saw historic levels of migration throughout the pandemic, as people switched to working from home and reimagined their living situations,” he said.
“Now, with a turbulent, unpredictable economy causing fear of recession, migrations are slowing, occupancy rates are falling and rent prices are following suit.”
The top five month-to-month declines for one-bedroom rent came in:
1. Baton Rouge, La.: 6.3% (October rent: $890)
2. Lincoln, Neb.: also 6.3% (October rent: $900)
3. Buffalo, N.Y.: 6.2% (October rent: $1,060)
4. San Jose, Calif.: 6.1% (October rent: $2,600)
5. Tulsa, Okla.: 5.9% (October rent: $950)
The top five month-to-month increases for one-bedroom rent came in:
1. Anchorage, Alaska: 6.3% (October rent: $1,180)
2. Winston Salem, N.C.: 6.3% (October rent: $1,020)
3. Fort Worth, Texas.: 6% (October rent: $1,240)
4. Boston: 5.9% (October rent: $3,060)
5. Greensboro, N.C.: 5.9% (October rent: $1,080)
Boston Beats SF; ‘Zoomtowns’ Cool Off
Boston’s one-bedroom rent surpassed that of San Francisco in October, making it second highest on the list after New York City. New York’s average one-bedroom rent is $3,860. San Francisco’s is $3,020, putting it in third place.
Also, “several of the country’s most popular ‘Zoomtowns’ for digital nomads are beginning to cool off,” the report said. That’s a reference to videoconferencing service Zoom.
One-bedroom rent is down month-over-month in almost every Florida city. And rent in every Arizona city is either down or flat from September.
Home prices are dropping nationally, too. The median existing-home-sales price slid 3% to $384,800 in September from August, according to the National Association of Realtors.
With the price declines in rents and homeownership, things are looking up in terms of shelter costs.
