Some signs that rents may be moderating after an up-and-down ride
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The price we pay to have a roof over our heads is not just many people’s largest expense, it also accounts for about a third of the costs used in the consumer price index to measure inflation.
In September, the index for shelter rose 6.6% over the previous year, accounting for 40% of the overall rise in inflation, excluding food and energy. Now, it appears that rent in particular is starting to come down for now.
The ride this country has been on when it comes to rent could be called a roller coaster, except that roller coasters are actually fun. The ride we’ve all been on is some combination of a haunted house and a food processor.
“2020 was really a year of divergence,” said Igor Popov, chief economist at Apartment List. “Whether rents were falling dramatically or rising dramatically depended on where you were. And then in 2021, rents basically went through the roof everywhere.”
Your view right now of what rents are doing depends. If you are about to sign a lease for the first time in a few years, I am so sorry.
“Both one- and two-bedroom rents are now about 9% higher this year than last year,” said Anthemos Georgiades, CEO of Zumper.
If, on the other hand, you’ve been looking at places to rent for the past few months and haven’t signed anything, you can breathe a little. “Month-on-month rents are going down right now,” Georgiades said.
Now, these two trends are actually two sides of the same coin. While 9% year-over-year growth in rents sounds atrocious, it’s a lot better than it was. Last year, they were up 12% to 15%, according to Zumper.
For most of this year, the pace of monthly rent increases has been slowing down. Rents started coming down in absolute terms a bit in September, according to Apartment List.
“Some of that is some of the fear and uncertainty in the general economy, and certainly general inflation isn’t helping,” said Thomas LaSalvia, director of economic research at Moody’s Analytics. “There was also a deceleration that was particularly notable in many of the cities that saw the greatest level of pandemic-induced in-migration.”
That’s because people aren’t flocking to these places like they used to. Think Jacksonville, Fort Worth, Tampa, San Antonio and Miami.
But it’s fall, and rents tend to fall this time of year. The real test of whether we are off this haunted carnival ride will come next spring and summer, when the rental market traditionally heats up again.
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