National rent prices drop below $2,000 a month
The median monthly rent in the U.S. dipped below $2,000 last month, a new report found, but remains high compared with just two years ago.
The median market rent decreased to $1,978 in December, a 1.41% drop from November and the lowest median rent since April, according to the January 2023 report published by Rent. Year over year, rents grew 4.77%, the lowest annual change since July 2021.
But December's reduced rent remains high after rental prices registered double-digit percentage increases for 11 straight months through September of last year. In December, renters were still paying $329 more per month versus December 2020, with many markets still seeing double-digit percentage increases.
"In the early months of [2022], the rate of rent growth quadrupled," said Selma Hepp, CoreLogic's deputy chief economist, regarding general rental trends. "And now it's rapidly decelerating. And so I think that rate of deceleration is going to continue until we hit that long-run average of about 3% to 4% rent growth."
Betters rental deals in the West
While the national rent slowed year over year, rents actually contracted in 10 states in December, according to the report, with four Western states leading the pack.
The largest annual decline occurred in Idaho, where rents dropped 5.4% from December 2021. That was followed by Nevada, down 2.7%; Arizona, down 2.5%; and Oregon, down 2.4%.
A separate report from CoreLogic noted that some of the cities in the West that were popular during the pandemic — such as Las Vegas and Phoenix — recorded the slowest year-over-year growth in November. In Rent.’s report, Phoenix rents fell 5% from December 2021.
"The areas that were growing really fast and are now slowing or declining saw the rate of increase due to immigration from areas that are super expensive,” Hepp said, “like coastal California to adjacent mountain West states like Idaho, Utah, Nevada, or Arizona."
"We've also seen the rate of out-immigration to those areas have slowed down quite a bit," Hepp added.
The six other states that posted annual decreases in rent included Virginia, down 1.2%; Maryland, down 1.1%; Pennsylvania, down 0.7%; Georgia, down 0.6%; Minnesota, down 0.3%; and Washington, down 0.1%.
Southern states still seeing rental growth
Six of the 10 states with the highest annual rent changes in December were in the South where relatively cheaper living costs have attracted more arrivals than their counterparts. Rent in Florida, which ranked first in rental growth, shot up 23.9% from the previous year, according to Rent.
Other popular southern states where rent increased by more than 10% included Arkansas, up 17.5%; Delaware, up 14.5%; Tennessee, up 14.2%; Mississippi, up 13.2%; and North Carolina, up 12.2%.
New York recorded the second-highest annual rent growth at 20.1%. But the state also registered the biggest monthly decline of 5.15% in December. According to one expert, this could be because New York City has reached its peak rent.
"With affordability shrinking, asking rents have already peaked in NYC and will continue to fall in 2023," said StreetEasy Economist Kenny Lee, who is not associated with the Rent. report.
Rent likely to stagnant
Where rent growth ultimately ends up for 2023 — down some, up some, or flat — remains up for debate, but many forecasts expect rent growth to slow substantially from their runaway trajectories in the last two years.
"Just seeing what's happening with the rental market, I think we're going to probably see leveling off where there's no growth for a few months," Hepp said, “before it picks up again" to more normal growth levels.
Rebecca is a reporter for Yahoo Finance.
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