Affordability for renters improving — for some

Zillow predicts that affordability for prospective homebuyers is likely to improve in the year ahead, thanks to lower mortgage rates, moderating home prices, and expected home growth.

Turns out, affordability for renters is likely to improve, as well — at least for some. It all ultimately boils down to new supply, according to Ben Keys, a professor of real estate at the University of Pennsylvania’s Wharton School.

Where it’s easier to build more, “they tend to be building at the high end of the market,” he said. “So most new apartment buildings come in toward the top of the rent distribution, and that's where the competition is for tenants at the moment.”

When units are vying for tenants, Keys said that they can get perks, negotiate with landlords, or even move at a discount.

But not all renters get that flexibility. “Many renters aren't feeling the benefits of new supply when it's occurring, either in a different market altogether or in a different price tier,” he said.

Zillow reports that its data shows renting is getting more affordable, said senior economist Orphe Divounguy.

With incomes increasing and rent growth moderating — especially compared to the big pandemic increases — “we're really talking about the share of income that a household would have to spend on rent and, according to our data, that measure is the lowest since roughly August of 2021,” he said.

The people seeing big affordability improvements, Divounguy added, are those young renters in smaller apartment units.