Selma Hepp, Chief Economist at CoreLogic, recently reported a decrease in year-over-year rent growth for both multifamily and single-family rental properties. The national average for single-family rentals in July 2023 was 3.1%, the lowest it has been in three years.
According to Hepp, this decline is not surprising given the significant increase of 30% since the start of the pandemic. Rent growth has now returned to its pre-pandemic trend that has been consistent since 2012.
The primary factors driving this trend are lack of affordability and households returning to their pre-pandemic locations after shutdowns ended. During the pandemic, areas with affordable housing options and desirable weather saw strong rent increases due to remote work opportunities attracting temporary residents from places like Miami, Las Vegas, and Austin.
However, these same cities experienced negative year-over-year rent growth rates in July at -0.6%, -1.0%, and -0.5% respectively as rents have adjusted back down after significant increases during COVID-19.
On a positive note, St.Louis saw an annual increase of 7/3% making it one of few markets with high demand for rental properties due to its affordability compared to other major cities like Chicago or Boston where job markets are strong but expensive housing costs make renting more appealing than buying.
This deceleration does not indicate weakness within the sector but rather an adjustment towards more sustainable levels based on local incomes according to Hepp who predicts continued moderate growth between 3-4%. As long as inventory remains low for homes available on sale while prices continue rising higher than before COVID-19 many will find renting still preferable especially when moving into unfamiliar neighborhoods within new metros until they decide where they want buy property permanently.
