As you’re undoubtedly well aware, residential rents are soaring—bad news for the 34% of us who don’t own our homes.
Rental information service Zumper’s National Rent Index hit a record high in July. The median one-bedroom rent totaled $1,450 in the month, up 2% from June and 11.3% a year earlier. The two-bedroom median rent hit $1,750 in July, also up 2% from June and up 9.3% from July 2001.
But good news may be on the way. Construction completions for new apartments should hit 420,000 units this year, a 50-year high, according to a study by RentCafe.com, an apartment search website.
Renters should benefit, because increasing supply should mean decreasing prices, as long as demand doesn’t rise sharply.
Pent-Up Demand for Rentals“This construction boom is driven by pent-up demand for apartments nationwide, especially as some renters postpone their dream to become homeowners amid soaring inflation and rising interest rates,” the RentCafe study says.
Home prices and mortgage rates have jumped this year, though the increases have decelerated recently. The 30-year fixed-rate mortgage averaged 5.13% in the week through Aug. 18, up from 2.86% a year ago, according to Freddie Mac.
In terms of pricing, The median existing-home sales price totaled $403,800 in July, up 10.8% from a year earlier, according to the National Association of Realtors (NAR).
But don’t get too excited about the potential for lower rents. “The construction industry is finally returning to pre-pandemic levels of activity,” Doug Ressler, manager of business intelligence at Yardi Matrix, said in a statement.
“But it is still being hampered by three familiar challenges: labor shortages, material costs, and availability, and supply chain issues.” Yardi Matrix is a real estate company that provided data for the report.
The Top 10 Cities for RentalsThe survey listed the top metropolitan areas for expected rental-apartment construction completions this year:
1. New York City: 28,153
2. Dallas: 23,571
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3. Miami: 19,125
4. Austin: 18,288
5. Houston: 17,759
6. Phoenix: 15,988
7. Seattle: 15,341
8. Atlanta: 12,838
9. Washington, D.C.: 12,176
10. Los Angeles: 11,356
On the home-buying front, if the economy continues to cool down, home prices should slide along with it. So if you want to buy a home, it may make sense to suck up a high rental rate now and wait to buy until prices come down.
And maybe the rental experience won’t be too bad if all this multi-family construction puts a lid on rents.
In any case, given elevated home prices and mortgage rates and sliding home sales, some experts believe the housing market is in a recession.
Existing-home sales dropped 5.9% in July from June, marking the sixth straight monthly decline, according to NAR.