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Rent: There has been an upsurge in rent for single-family homes and apartments, but it has been increasing very gradually.
Inflation is straining consumers as landlords’ pricing power has been dwindling.
Growth
Rent growth decreased in November for the tenth consecutive month, increasing by just 3.4% compared to the same month in 2021.
According to Realtor.com, it is the smallest growth in the past 19 months.
The median asking rent in the 50 biggest metro areas decreased, dropping to $1,712.
It is down $22 from October and $69 from its peak in July.
Danielle Halle, the chief economist at Realtor.com, said the following:
“Many Americans’ budgets are being pulled in multiple directions as the holidays approach, bringing a more typical season cooldown to the rental market that we haven’t seen in the last few years.”
“Despite this recent relief, renters will continue to be challenged by affordability in 2023, with rents forecasted to hit more record highs.”
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Market
Each market offers a different level of rent relief.
For instance, rents declined for the first time in nearly two years in places like Austin, Texas, and Jacksonville, Florida, while rentals grew by 0.9% annually in the Sun Belt.
The Midwest markets are becoming less accessible as rents rise by around 10% and 9% in Indianapolis and Kansas City, respectively.
Even while the Realtor.com study only considers single-family rents, a separate survey from October painted a similar picture.
According to CoreLogic, the slowest pace of appreciation in more than a year was seen in October 2021, when single-family rent growth slowed to 8.8%.
The rate is still three times higher than it was before the pandemic.
Although rents typically drop in the fall, in 2022, they did so more slowly.
Homes and apartments
Apartment rents climbed more slowly than single-family home rents because fewer apartments were available than single-family homes.
Additionally, there was a higher demand for single-family houses in the suburbs in the early years of the pandemic.
The majority of the renters are still there.
The Sun Belt is still experiencing significant demand in the interim.
For instance, the highest single-family rents were found in Miami, Orlando, and Florida, which increased by 15.5% and 16.1%, respectively, over the previous year.
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Construction
Although homebuilders are continuously growing the market for rental homes, multifamily complexes may already be feeling the effects of slower rent increases.
According to the US Census, the number of multifamily building permits dropped by more than estimated (18%) in November compared to October.
Peter Boockvar, the chief investment officer of Bleakley Financial Group, said:
“I have been hearing anecdotal stories of multifamily projects getting canceled because the numbers no longer work with the still elevated cost of construction, the sharp rise in funding rates, and the slowing pace of rent growth.”
The variables point to a more pronounced drop and significant continuous building the following year.
In November, 932 000 multifamily apartments were under construction, according to Robert Dietz, senior economist for the National Association of Home Builders.
Since December 1973, the number was at its peak.
“We are forecasting declines for apartment construction in 2023 due to the large amount of supply in the construction pipeline, as well as tightening commercial real estate finance conditions,” wrote Dietz after the November home construction report.
The Commerce Department’s assessment from November found that single-family home building in the US had fallen to a 2-year low.
Additionally, the study found that the number of permits for new construction fell as mortgage rates continued to rise and cool the housing market.
References:
Rents are now rising at the slowest pace in 19 months
Higher mortgage rates depress US single-family housing starts, building permits
