Janice R. Andrews
Renters on a tight budget were somewhat relieved to see that nationwide rental costs fell by less than half a percentage point in December. Nevertheless, the good news doesn’t end there. Chief economist Danielle Hale of Realtor.com predicts that a spike in new apartment building would increase supply and lessen tenants’ financial strain. In an interview with Yahoo Finance Live, Hale projected a continuous downward trend in rental costs while highlighting the quantity of supply in the pipeline.
The Supply Surge:
According to Hale’s observations, the real estate market is preparing for a flood of newly constructed apartments, a development that has already resulted in falling rental rates for the entirety year 2023. According to Realtor.com statistics, rental prices decreased by 0.4% annually in December, which is the ninth consecutive month of declines in rental prices. Renters may be able to find more cheap housing alternatives as a result of the anticipated continuation of the downturn.
Effect on Incomes and Inflation:
Not only does a sustained drop in rent benefit tenants, but it also supports the Federal Reserve’s attempts to rein in inflation by hiking interest rates. The expense of housing, which includes rental rates, has significantly impacted inflation overall. Rent increases that decrease help both people and the larger economic objective of limiting inflationary pressures.
Present Rental Situation:
December’s median asking rent was $1,713, which represents a 22% rise over the same month in 2019. This is despite the favorable trajectory. The West and South are oversupplied, which drives down prices, while the Northeast and Midwest continue to see consistent rent increases as a result of greater demand than supply. These regional dynamics are important.
Location Matters:
Hale says, “It really matters where you are,” underscoring the need of taking local rental market trends into account. Renters therefore like to be aware of local trends.” Changes in rental prices are determined by regional differences in supply and demand, thus tenants must be aware of the dynamics in their particular localities.
Aside from geographic location, factors affecting rental prices include deciding whether to move to a new location or remain in one’s current one. Hale said residents who have stayed in one location may see rent hikes that are somewhat more than those seen in other locations. This emphasizes how crucial it is to maintain vigilance and, if advantageous, consider moving.
Housing Market Dynamics:
As the housing market struggles with a supply shortage, there is a rush to add additional inventory. As per the January real estate study by CoStar Group, the number of finished units in the multifamily market reached a 40-year high in 2023, with an expected total of 556,000. The increase in available rental properties gave tenants additional choices, which slowed the rate of increase in rent.
Future Projections:
Although the rate of new unit development has remained steady, estimates point to a possible decrease in 2024. According to CoStar, 444,000 units should go online this year, indicating a slowdown in the rate of new home construction. As supply and demand continue to affect the rental market, tenants should keep an eye on these trends.
There is a good chance that rental prices will continue to decline because of the large number of new units that are coming on the market. It is recommended that tenants keep up with local trends, think about moving if needed, and keep an eye on how the housing market is changing. Renters may find themselves in a better position in the upcoming months with more alternatives and the possibility of more cheap homes, as building predictions suggest a possible halt.
