Nationwide Rents Drop For First Time In Two Years

The latest real-time rent data from the property research firm CoStar Group shows apartment rents in the US are fading from record highs for the first time in almost two years, according to WSJ. 

CoStar said national US rents in August fell .1% from July. It was the first monthly drop since December 2020 — a sign rents may have finally peaked. 

Two other property research firms, Rent.com and Realtor.com, recorded slight monthly rent declines last month. 

Monthly rent declines are still minuscule compared with the 23% increase since August 2020, according to Realtor.com. 

Orphe Divounguy, an economist at Zillow Group, said there’s no guarantee that rents peaked because soaring mortgage rates have unleashed an affordability crisis where households are being priced out of owning and forced to rent. 

Meanwhile, CoStar forecasts more rental market cooling this fall and winter. They say September rents are expected to decline for the second consecutive month. Some analysts expect rents to continuing decreasing on a monthly basis through the end of this year — that would be a drastic change from the same period in 2021 when rents soared. 

We outlined first in Some Good News: Rents Have Finally Peaked As Rental Market Enters “Widespread Cooldown” and then Some More Good Inflation News: Owner-Equivalent Rents Are About To Peak that rental hyperinflation peaked earlier this year and would continue to slow through the end of the year. 

WSJ noted seasonality, new apartment construction, and unaffordable rents are some factors cooling rental markets. 

Further hints about the rental market were heard from one of the largest owners of multifamily units in the US, Starwood Capital Group, whose CEO, Barry Sternlicht, told CNBC:

“The pace of rent increases, we’re seeing it go down month-to-month.”

Last week, we noted that Manhattan’s red hot rental market finally plateaued after six months of “record number of records” as median rent in the borough peaked in July at $4,150 and slid in August to $4,100. 

Perhaps what’s happening in NYC is a sign US rental market slowdown could gain momentum in the months ahead.