Business Insider first published this story.
Getty This year's rent increase could give you reason to celebrate.
Tom Lawler, a former Fannie Mae economist, wrote in a recent real estate newsletter that he expects rents to not just slow down, but to experience a rare decline in real dollar amounts next year. The declines are expected to spread and accelerate.
Rents have begun to decline in some markets. In the third quarter of 2022, national asking rents fell by 0.4%, reflecting a shift from a year ago when demand drove prices to historical highs.
The forecast hinges on the fact that US builders are still ramping up construction despite the fact that there aren't as many people who want to rent. There is excess supply in a housing market that has been weighed down by shortages for a long time.
Georgiades says financial and economic fear are driving the declines.
He said that historic levels of migration were seen as people switched to working from home. With a turbulent, unpredictable economy causing fear of recession, migrations are slowing,Occupancy rates are falling and rents are following suit.
The predictions are being made in the rental market. According to RentCafe, apartment demand is decreasing despite the fact that construction of multi-unit housing is at a 50 year high. Rental demand turned negative in the third quarter of the year as lease traffic plummeted, according to data from RealPage. It was the first time in the company's history that demand turned negative.
As the Federal Reserve continues to raise interest rates, the decline in rent prices may be a lifesaver for Americans' bank accounts. Falling rents could help convince the Fed that inflation is under control and help the US avoid a big downturn like mass layoffs and plunging home values.
It's a race against the Fed right now, according to a former Fed economist. The quicker inflation steps down, the quicker the Fed will back off.
American renters will be happy with lower rents after a record 17.6% increase in 2021.
Many big cities are already seeing declines in their populations. In October, more than half of the 100 US cities measured by Zumper posted month-over-month price declines. The national median rent for a one and two-bedroom unit fell from September to October.
Rents fell in all of the cities that experienced rapid rent growth in the last few years. The median price for a one and two bedroom apartment in New York City fell over 2%.
The Fed is likely to scale back the pace of its rate hikes if the price growth slows. Falling rents could be a way to convince the Fed that the inflation is under control.
The severity of the downturn may be dependent on how quickly prices fall.
The recent rental market data shows that things are moving in the right direction.
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