The median asking rent in the US has dropped by 0.4% to $1,937 in March from a year earlier, marking the first annual fall since March 2020, according to a Redfin report. The decline was attributed to a rental market glut following the pandemic’s homebuilding boom which led to landlords reducing rent and offering concessions due to higher rental vacancies. As a result of the abundant rental supply, rental prices fell in cities including Austin, Texas (-11%), Chicago, Illinois (-9.2%), and New Orleans, Louisiana (-3%). In the same period, wages increased at roughly the same pace.
The data was welcomed by analysts, who suggested that a slowdown in the rate of inflation was likely. Shelter inflation deceleration is expected to lead to slowing wage growth and demand, which should ultimately drag down the overall CPI in coming months. Consumer price inflation remains high, with rent continuing to lag behind home prices, but as rental demand wanes, it’s predicted that inflation will decline. First American Family of Companies’ Deputy Chief Economist, Odeta Kushi, noted that owners’ equivalent rent (OER) and primary rent in Core CPI had risen 0.5% for the first time in around a year.
The pandemic has had a significant effect on rental markets, with many people opting to rent rather than buy due to uncertainty over future employment and concerns that low interest rates encouraging higher house prices might prompt a housing market crash. While the median asking rent in the US is not fully back to pre-pandemic levels, it is within 19.9% of the figure at the onset of the pandemic. Cities recently experiencing increases in median rent include Raleigh, North Carolina (+16.6%), Cleveland, Ohio (+15.3%), and Charlotte, North Carolina (+13%). Redfin agent Dan Close suggested the market was moving back towards some kind of equilibrium and it’s expected that rent rates will continue to return to normal, which is regarded as positive.