Rents Have Finally Begun To Fall—So Where Are They Dropping the Most?
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The rental market appears to have hit an inflection point—and not a moment too soon for many Americans who have been squeezed tight by record-setting price increases over the past few years.
Finally, the steady drumbeat of steep and often untenable increases in leases across the U.S. is slowing, and rents have even begun falling in many of the nation’s hottest real estate markets. Those declining prices are welcome news for renters who have been through the wringer. Rental prices have risen more than 20% over the past three years—while their earnings increased by only about 10%, according to Realtor.com® and U.S. Census Bureau data.
While Realtor.com economists predict that, nationally, rental prices will continue climbing in 2023, they expect the days of double-digit hikes are likely over.
As of November, rental prices in nine of the 50 largest metropolitan areas are showing year-over-year declines. That’s up from seven of the 50 largest metros just one month prior, as the national rental market correction continues. And for the metros that already saw rents turning south before November, prices dropped below October prices. That’s a steeper dip than just the typical seasonal declines, suggesting a deepening trend.
The data comes from the most recent Realtor.com rental report, which is compiled using the site’s rental listings.
The places where rents are falling most are America’s Sun Belt cities, in the West and the South, where the climate is warmer and, in many cases, housing has traditionally been more affordable.
“People started to move back to big cities,” says Realtor.com economist Jiayi Xu. “During the [COVID-19] pandemic, people were moving to the Sun Belt areas like Florida. Now, when we look at data from Boston and Chicago, demand there is up.”
Indeed, rental prices are still growing in expensive metros like Chicago, Boston, and New York City, as well as cheaper Midwestern cities like Indianapolis, Detroit, and Kansas City, MO.
Bryan Kyle, a real estate agent and property manager at First Serve Realty in Las Vegas, one of the cities with the biggest rent price declines, says the area has a lot of smaller mom-and-pop owner/landlords, who collectively tend to be more amenable to lowering leases to get tenants signed up.
The typical small investor, Kyle says, is usually middle-aged or near retirement and looking to buy a home to rent out for an income stream. But this type of investor often can’t afford to have an empty rental home for too long and so will be the first to drop rent prices.
The income lost in a month or two months without a tenant adds up, Kyle says, to far more than what a 5% price decline in the rent price would mean over the course of a year.
“They have no intention to sell, so they realistically have to lower the rental price,” he says.
While the large investors and big apartment complexes don’t have to be as sensitive as the small investors to rental price changes, they have to compete and meet renters where they are, pricewise.
Here are the nine metro areas in the U.S. where rent prices are down compared with the year before.
1. Riverside, CA
Riverside, CAGetty Images
Median November 2022 rent: $2,071
Year-over-year rent change: -5.5%
Among the metro areas with declining rent prices, Riverside—a sprawling suburbia about an hour east of Los Angeles known for its citrus industry—is where rent prices are falling the most. Prices are down more than 5% compared with the same time last year.
Riverside’s appeal is that it’s much cheaper than neighboring Los Angeles, where median rents were $2,864, and San Diego, at $2,784 in November. However, it’s still the most expensive metro on this list.
“It used to be a bedroom community for L.A.,” says Doug Shepherd, a real estate broker and property manager at Better Homes and Gardens Real Estate Champions, in Riverside. “But then industry came in, a lot of big logistics operations.”
The influx of middle-income jobs spurred a boom in new housing, Shepherd says, and the housing sales and rental markets were both moving fast.
“It’s really just the last quarter of last year when things slowed down,” he says. “Now rental applications have slowed down tremendously, and it’s taking a lot longer to get a lease signed.”
Rental prices just got too far ahead of the area’s incomes, Shepherd says, and that’s reflected in the recent price declines.
For a little above the average price in Riverside, renters can find new apartments in the vibrant downtown of the metro area’s namesake city.
2. Las Vegas, NV
Las Vegas, NVGetty Images
Median November 2022 rent: $1,481
Year-over-year rent change: -4.9%
Rental prices in Sin City are down almost 5% compared with a year earlier and more than 3% from just a month earlier.
The steep price swings are built into the area’s DNA, says Kyle, with First Serve Realty. After all, “Las Vegas is a place for gamblers,” he adds.
And while the area has seen its share of big price fluctuations, particularly during the 2008 housing crisis when it became one of the nation’s epicenters for home foreclosures, it’s poised for continued growth, he says.
The city recently publicized new investments aimed at keeping the city a desirable place for people to be, Kyle says. “It’s a laundry list of projects, with [about a] half-dozen casinos going up.”
3. Sacramento, CA
Sacramento, CAGetty Images
Median November 2022 rent: $1,838
Year-over-year rent change: -4.8%
California’s capital, located at the northern end of the state’s massive agriculture-producing San Joaquin Valley and about 90 minutes northeast of San Francisco, received an influx of new residents during the pandemic. Many newly remote workers left the pricey Bay Area and moved to Sacramento, where real estate prices and the cost of living were significantly lower. (At $2,939, San Francisco’s median rent in November was about $1,000 more a month than in Sacramento.) That drove up rent prices here.
But now that the influx of new residents is ebbing and locals are getting priced out, prices have begun coming back to earth.
For around the area’s average monthly price, renters can find a traditional courtyard-style apartment near the city’s downtown.
4. New Orleans, LA
New Orleans, LAGetty Images
Median November 2022 rent: $1,371
Year-over-year rent change: -2.8%
Prices are plunging in the Big Easy, the cheapest metro on this list.
The declines might be due to the city extending its ban on short-term rentals, such as homes listed on Airbnb, last year. Many of these homes could be put back on the market as rentals or sold to buyers who plan to live in them.
Renters can score a three-bedroom, two-bath ranch house in the city for $1,500 after the landlords dropped the price by $100. Or they can save money with a one-bedroom apartment for $724 a month.
5. Phoenix, AZ
Phoenix, ArizonaGetty Images
Median November 2022 rent: $1,600
Year-over-year rent change: -2%
Phoenix was one of the poster children of the pandemic real estate market. Prices spiked for rentals as well as homes for sale as investors, retirees, and what seemed like everyone else headed to the sun-drenched Southwestern mecca.
But as mortgage interest rates spiked, investors and homebuyers have since backed off as many were priced out. And the slowdown has extended into the sprawling metropolitan area’s rental market.
Renters can find a one- or two-bedroom apartment in the heart of the historic Roosevelt Art District downtown for between $1,500 and $1,700 a month.
6. Atlanta, GA
Atlanta, GAGetty Images
Median November 2022 rent: $1,689
Year-over-year rent change: -1.8%
One of the most vibrant housing markets of the past few years, Atlanta shows it’s not impervious to the declining rent price trend that’s picking up steam.
Atlanta stands out for having the priciest studio rents on the list, even though overall rent prices there are in the middle of the pack otherwise, reflecting the continued high demand for dense housing in the metro area’s urban core.
7. Tampa, FL
Tampa, FLGetty Images
Median November 2022 rent: $1,783
Year-over-year rent change: -1.8%
Over the past few years, Tampa has been seeing some of the largest rent hikes in the nation. Rental prices in the northwestern Florida city on Tampa Bay rose by more than 40% year over year in late 2021, according to Realtor.com data. Prices rose as new residents flocked to the warmer-weather state, which boasts a lower cost of living and lower taxes than many larger, more expensive cities.
However, that run-up in prices has now turned into a reversal.
For about the average Tampa rent price, someone can get a relatively new apartment with modern amenities in the city’s historic Ybor City neighborhood.
8. Jacksonville, FL
Jacksonville, FLGetty Images
Median November 2022 rent: $1,454
Year-over-year rent change: -0.8%
Jacksonville is new to the list of metros with declining rent prices, with a relatively sharp turn south. Just a month earlier, rent prices were still increasing.
Like in Tampa, rental prices had soared in late 2021 and early 2022, shooting up more than 30% year over year last January, before steadily coming back to earth.
Jacksonville is relatively affordable, compared with other metro areas on the list, and it became a hot spot for new residents during the pandemic. But the turn from positive to negative rent price growth could indicate overall cooling for the area’s housing market.
9. Austin, TX
Austin, TXGetty Images
Median November 2022 rent: $1,656
Year-over-year rent change: -0.6%
Austin was emblematic of the pandemic era’s massive migration toward sunnier and less expensive cities. And, as a result, prices skyrocketed. But for the first time in at least 20 months, Austin’s rent prices are now headed down.
Despite the small year-over-year rent price drop, it’s still attracting new residents at a breakneck pace, says Brad Pauly, the broker/owner of Pauly Presley Realty in Austin.
“Austin still has [lots of] people moving here every day,” Pauly says. “Prices have come down off the highs, and that was expected, but there’s still not a lot of inventory. Occupancy is still in the 90%-and-above level.”
Pauly points to the continuing influx of companies and good-paying gigs, as well as the many apartment and condo construction projects going up, as signs that Austin will continue to be one of the country’s primary destinations for renters—even if its longtime rep as a true urban bargain is shifting a bit.
“Investors know what’s ahead,” he says of the many large multifamily construction projects. “And, yeah, Austin used to be a cheap city, but it’s not anymore and it’s not going to be cheap in the future.”
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