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Rents Fall As Rapidly As They Rose In Pandemic Hot Spots: Will This Continue In 2023?

Median rent costs in the U.S. are beginning to moderate as high inflation, high interest rates, and low consumer confidence cools demand.

Nationally, rents are growing at a pace three-times slower than they were growing last year, when inflation was ramping up. Redfin Corp RDFN estimated rents on a national level rose 4.8% on a year over year basis, the smallest increase since July 2021.

Some of the nation’s busiest metros are seeing year-over-year declines in monthly rents. The trend should continue throughout the year as as price changes among new leases filter down to market-wide rent levels.

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For a visual representation, the Labor Department issued Consumer Price Index data Thursday showing that the shelter index — which includes rent of primary residence — was the dominant factor in the monthly 5.7% increase in the index for all items less food and energy.

The rent index rose 0.8% month-over-month, and the shelter index rose 0.8% month-over-month, and 7.5% year-over-year.

The image below shows the disparity between rent growth right now, against where the CPI pegged rent inflation.

Between March of 2021 and December 2021, rent growth rapidly spiked, rising nearly 20% in just nine months, whereas the trailing shelter index in the CPI began showing moderate growth in December 2021, and has grown at a steady pace since.

On a metro basis, the steepest year-over-year declines are taking place in markets that were caught up in the first wave of pandemic rent inflation, according to ApartmentList, when American’s rushed to warmer areas such as Arizona, and California.

Here’s the 10 largest metros with year-over-year declines in rent costs, with data provided by ApartmentList.

Rank

City

Year-over-year rent growth

1

Scottsdale, AZ

-6.9% (nice)

2

Las Vegas, NV

-4.6%

3

Henderson, NV

-4.3%

4

Oakland, CA

-2.8%

5

Cleveland, OH

-2.7%

6

Reno, NV

-2.4%

7

Chandler, AZ

-2.3%

8

Moreno Valley, CA

-2.3%

9

Irvine, CA

-2.0%

10

Sacramento, CA

-1.7%

Stay up to date on developments in the housing market, here.

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