Rent growth is slowing down

Rent growth for single-family homes slowed in January, but prices ended up 28% higher than before the pandemic, which Corelogic said points to spillover pressure from a tight sales market.

Rents rose 2.6% annualized in January, a slowdown of almost three percentage points from 5.5% through early 2023. Growth slowed from a similar 2.8% in December.

Across price categories, the pace of rent increases in January was also at levels between 2.8% and 3%, Corelogic found.

But the year-over-year numbers don’t fully reflect the changes in the rental market since the pandemic began, said Molly Boesel, chief economist at Corelogic.

“While annual U.S. single-family rental growth was a modest 2.6% in January, that increase built on years of above-average annual gains,” Boesel said in a press release. In the four years since February 2020, rents have increased by approximately 28% in total.

Prices rose partly due to a slow period purchasing market characterized by limited inventory That will keep potential homebuyers staying in their current units or looking for single-family homes, Corelogic said.

“Additionally, while rental growth is slowing, costs are still rising in most of the country. The average rent for a three-bedroom home has increased by more than $100 in the past year and by more than $500 in the past three years,” Boesel added. .

By comparison, average prices for existing home sales continued to rise at an even faster pace in late 2023 as buyers responded to what turned out to be a drop in mortgage rates. The increased demand for housing helped Prices increase by 5.5% year-on-year in December, according to the Corelogic Case-Shiller home price index.

The lowest and highest rental price levels, defined as properties asking 75% or less or 125% or more than local median values, reflected the national peak. Rental growth in these segments has increased by 29.5% and 26.9% respectively since the beginning of 2024, Corelogic notes. But all four rent levels slowed the rate of increase from a year ago.

Last month, Corelogic predicted that rental growth in 2024 would be between 2% and 4%.

Of the 20 leading markets tracked by the real estate data and analytics provider, Honolulu recorded the highest year-over-year increase at 6%. Seattle and New York followed suit, with prices rising 5.2% and 5.1% compared to January 2023.

Four cities recorded annual rent declines, led by Miami and Austin, Texas, which saw similar declines of 2.4% and 2.3%. Rental costs also fell in January by 1% and 0.9% in New Orleans and Minneapolis.