Rental Market Cools: Asking Rents Dip 1.4% Month-Over-Month

Asking rents in the U.S. dipped 1.4% month-over-month, but rose 4.8% year-over-year.

That's the smallest increase in median asking rents since July of 2021, according to data issued Thursday by Redfin Corp RDFN.

What Happened: Rents grew at a pace three times greater last year than it is growing now. Median asking rents in the U.S. rose to $1,979 in December on a year-over-year basis, as rental demand slipped due to persistently high monthly costs.

Read also: Expert Economist Predictions For The Housing Market In 2023: Will Home Prices Decrease?

December marked the fourth consecutive month of single-digit growth following roughly a year of double-digit percentage increases.

Median asking rents hit an all-time high of $2,053 back in August of 2022, and Redfin economists think prices have more room to fall.

“While [rents] cooled significantly from their peak, it still costs the typical renter 20% more to take on a new lease than it did two years ago,” said Redfin’s Economics Research Lead Chen Zhao in the note.

2022 Rental Market Summary - Median Asking Rents

“An increase in the number of rentals on the market should also cause rents to ease in the coming months,” Zhao continued. “Rental supply is growing due to an influx of construction in recent years, ebbing household formation and a slow homebuying market, which is driving many homeowners to rent out their properties rather than sell.”

Why It Matters: 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.

“Rents have room to fall,” Zhao said.

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