In May 2023, rent prices dropped for the first time since 2020, according to a new Realtor.com analysis. The median rent price for studio, one-, and two-bedroom rentals in 50 major metro areas fell by 0.5% to $1,739 per month. These figures are still $344 higher than in July 2019 and $3 dollars higher than last month.
Rentals will decrease overall by 0.9% in 2023
While a slight fall in rent costs is good news for tenants, this could only be a minor indication of future price drops. According to Realtor.com, rentals will decrease overall by 0.9% in 2023.
In a report from GO Banking Rates, two-bedroom apartments saw the biggest price drops, down by 0.5% or $10 from the previous year. In contrast, the rent for studio apartments increased by 2%, while the rent for one-bedroom apartments increased by 0.4% on a yearly basis. For renters, this translates to the following median rentals for various sized apartments: $1,463, $1,628, and $1,923.
Since rentals peaked in July 2022, cost-conscious renters have chosen smaller living quarters, which has increased demand for studio and one-bedroom apartments.
More tenants will decide not to renew their leases
Renters’ main worry continues to be affordability even though rental costs have occasionally fallen. Many tenants are forced to choose between a rock and a hard place when deciding whether to extend their lease or move to a new residence.
The average rent increase for a lease renewal was 3.5% in the first half of 2022, compared to a 12.2% increase for new tenants, based the most available Bureau of Labor Statistics statistics. Many renters have decided to stay in their current apartments since doing so is more economical financially given the possibility of rising housing costs.
In an article from The Washington Post, this might lessen competition for renters who decide to relocate. As more than 450,000 recently finished multi-family apartments increase the supply on the rental market, we can also observe a decline in demand. Given the predicted further decline in pricing, it’s possible that more tenants will decide not to renew their leases.