Asking rents in the U.S. reached a record high in August, but for the third consecutive month, rent growth decelerated slightly.
Redfin data indicates that the median national asking rent increased 11% year over year to $2,039, it decreased from a peak gain of 19% in March, making it the weakest annual growth in a year.
The median asking rent increased by 0.4% month over month, which is the weakest gain since December 2021 and less than the 1.6% increase seen a year earlier.
“Rent growth will likely slow further as the Federal Reserve continues to raise interest rates. Higher interest rates impact the rental market because they put a damper on spending power in the economy as a whole, including renters’ budgets,” said Taylor Marr, Redfin Deputy Chief Economist.
Marr added, “growth in rents is also likely to be slowed by a boost in rental supply. There are nearly a million rental units under construction that will hit the market in the coming months and years.”
It’s true — according to residential construction data, authorized building permits for multifamily housing units in buildings with five units or more were up at a rate of 571,000 in August.
Although, over the last two years, even with the ramp-up in the construction, completions are waning; this will put additional pressure on rents.
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According to information published in a Labor Department report on consumer prices last Tuesday, the August increase raised shelter inflation for the past 12 months to 6.3%, the largest over any such time since 1986.
Laura Rosner-Warburton, a senior U.S. economist at the New York-based research firm MacroPolicy Perspectives, says it will peak out at approximately 6.9% in January before slowing down to about 4.7% by the end of 2023.