NEW YORK (AP) — Rents are beginning to decline after reaching record levels last summer.But experts aren’t sure if the slowdown will continue.
Christopher Mayer, a real estate professor at Columbia Business School, said people looking for an apartment now could have a better experience than they did in May or June.
“We’re not seeing rents going up as fast, the rental market is softening a little bit,” he said.
The national median rent applied for increased 14% in July from July a year earlier, the smallest annual increase since November 2021, according to a new report from red fin. While that percentage is still high, it is down from 15% in June and 16% in May.
Experts say the market could slow further towards the end of the year, but there is still a lot of uncertainty.
“I wouldn’t be surprised if we get to 2023 before things really get back to normal,” said Brian Carberry, senior managing editor at Rent.com, an apartment search website owned by Redfin.
A lot depends on where you live. Cities in Florida like Boca Raton and West Palm Beach have seen rents decrease -0.1% and -0.5% respectively compared to last month. But according to Apartment List, rents in coastal California cities like San Diego have continued to rise over the past year.
In Rochester, New York, rent increased 15.3% in August from the same month a year earlier, according to data from Apartment List. An average two-bedroom apartment in the Rochester area was $1,318 in August, compared with $1,116 a year ago.
Bank of America CEO Brian Moynihan said high rents are a concern because they can account for a large portion of a household’s take-home pay.
“Gas prices are going down, but rents are going up 10, 12, 15%. And rent can end up absorbing 40% of income for these households,” Moynihan said in a recent interview with the Associated Press..
While things are looking a little better for renters than they were a few months ago, it’s still a homeowner’s market, Mayer said.
If your lease expires, staying and negotiating with your landlord might be a better option than trying to move, at least until the rental market slows further, said Paula Munger, assistant vice president of research and industry analysis at the National Apartment Association. .
“When you renew your lease, you’re definitely not paying the same as someone new moving in,” Munger said. “If you can, stay in your apartment.”
One of the main reasons for the rent spikes has been increased demand from people outside of a booming housing market. That market is starting to slow down, which could mean more people can afford to buy and won’t need to rent, but with interest rates rising, some may not want to take out mortgages.
“With inflation now all over the market, there’s not enough supply, so prices are going up,” Munger said. “That’s the downside for people, just not having enough choices and options for what they would like in a housing unit.”
That was the experience of Erika Tascon, a 22-year-old Los Angeles resident who lived with roommates but wanted to find an apartment with her boyfriend.
After visiting more than 10 units, the couple chose a 500-square-foot one-bedroom apartment in Beverly Hills where they pay $2,750 per month. Median rent for a one-bedroom apartment in the area is $2,773, up 14% from last year, according to data from Zumper.
“I think landlords are taking advantage of tenants right now,” said Tascon, who pays $200 more a month than he did for his previous apartment.
In Britni Eseller’s case, high demand meant she had to rush through her application to beat the 10 other people who toured the apartment she wanted.
“Because everyone is in scarcity mode, they’re willing to find a place that might be somewhat affordable and, sadly, they’re okay with overlooking chipped floors or a broken appliance,” said Eseller, who lives in North Park, a San Diego neighborhood
Developers have ramped up construction on apartment buildings this year, which could eventually help ease the crisis. But it will likely be a while before that is reflected in the market.
Meanwhile, high rents are disproportionately hurting low-income residents across the country, said Ben Martin, director of research for Texas Housers, a nonprofit that works for housing justice.
In May, rental prices in Dallas and Fort Worth rose 21.6% last year, according to data from Redfin. In Austin they rose 48.4%. One of the main reasons is that high-income people from coastal areas like California and New York moved to Texas during the coronavirus pandemic, when they realized they could work remotely and live more cheaply. In December of last year, for example, Tesla moved its headquarters from Silicon Valley to Austin.
“People who have the lowest incomes are paying more of their total money,” Martin said. “Which means they don’t have money for anything else: school supplies, groceries, gas, clothes, all the essential things you need to live.”
In addition to cutting basic expenses, renters are also putting more people in apartments, Martin said.
Increasingly, people can’t afford their houses at all and now they face eviction. Governments have ended eviction moratoriums and rental assistance programs that allowed people to stay in their homes during the pandemic.
The eviction laba research organization at Princeton University, is seeing a record number of evictions that have exceeded pre-pandemic levels.
In Houstonwhere the eviction moratorium ended in July 2021, there were 7,242 eviction filings in July this year, 51% above average, according to The Eviction Lab. Other cities like the Angels have extended eviction moratoriums through the end of this year.
Tenants who cannot afford rent increases but also cannot afford to move are often forced to choose between paying rent and meeting basic needs. An eviction remains on the tenant’s record, so more difficult to find housing in the future.
“The threat of eviction is the problem that is coming,” said Nick Graetz, postdoctoral research associate at The Eviction Lab. “Part of the reason tenants sacrifice so many other things to try to pay unreasonably high rents every month is because of the constant threat of being evicted from their home”.
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