Once-rapid declines in rental prices are stalling out, a sign that high inflation could be here to stay.
A new report published by Realtor.com shows that rents declined for the 10th straight month in May, with asking prices down about $13, or 0.7%, compared with the same time last year.
However, that marks a slight increase from April. The median asking price in May was $1,732 – up about $10 compared with the previous month, suggesting that progress on rental costs is stagnating.
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In fact, the median rent was just $24 less than the peak seen in August 2022, according to the report. Notably, asking prices are still $306 higher than the same time in 2019, before the pandemic began.
Rent has been driving inflation for months as pandemic lockdowns, pent-up demand and record-high housing prices sent costs soaring. The slowdown in progress indicates that "inflation may continue," according to Realtor.com.
"This deceleration trend could hinder further improvements in the overall rate of inflation and add long-term uncertainties, underscoring the consistent need for additional housing construction to alleviate the supply shortage that is contributing to higher costs," the report said.
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High rents are a concerning development because more expensive housing costs most directly and acutely affect household budgets. Roughly 34% of households are renters, according to Census Bureau data, but that figure is even larger for lower- and middle-income families. More than half – roughly 52.6% – of households with family income that is below the national median of $31,133 are renters.
Households, in general, spend about 7% of their annual expenditures on rent, while households without college degrees spent nearly 10% of their total expenditure on rent in 2020.
There are several reasons for runaway rent costs, including high demand as steep prices and mortgage rates locked many would-be homebuyers out of the housing market. Low inventory and a pandemic-induced demand for more space also explains the increase. Single-family home rents rose 14% in 2022, according to CoreLogic.
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However, there are some signs that high rental prices are easing faster in certain parts of the country.
The largest rent decreases took place in the South and West, with the biggest drops in Austin, Texas (-9.3%), Nashville, Tennessee (-8.3%), and San Antonio, Texas (-8.2%), thanks to an influx of new housing supply in those cities.
However, some areas in the Midwest saw a spike in rental prices last month. The biggest increases were in Indianapolis (4.4%), Milwaukee (4.3%) and Minneapolis (2.9%).
