Rental prices in the U.S. have reached a new normal, which is good news for multifamily investors and not-so-good news for those needing rental housing as escalating interest rates keep them out of the housing market.
According to rental platform Zumper, the national median price for a one-bedroom apartment rose to $1,504 in April, the seventh straight month of increases, although slowing considerably. What can you get for $1,500? That depends on the region and city. But one thing is for sure — there are no indicators that the rental market is ever going back to 2019 rates.
“It’s going to be really difficult to see pre-pandemic numbers again anytime soon,” Zumper Chief Product Officer Tanguy Le Louarn told Benzinga.
But in 2023, is $1,500 the new $1,300 rental rate?
“Some markets are going to have to correct themselves, like San Francisco. But some smaller cities like Columbus (Ohio) will continue to increase,” Le Louarn said. “Cities like Pittsburgh used to be a place where buying was cheaper than renting. That’s changed.”
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Zumper reported that rents in “pandemic-era darlings like Boise and Phoenix” are slowing, while the top two most expensive cities — New York and Jersey City — continue to surge. New York’s one-bedroom median of $3,780 is nearly $800 above San Francisco, the city with the third-highest rents.
According to Moody’s Analytics analyst David Caputo, finding affordable rentals right now is one of the great economic challenges for people seeking a place to live.
“Rental rates sped past wage growth, causing financial distress to Americans paying higher rates without a higher income to match,” he wrote. “Maintaining affordable rental housing remains a challenge, especially for the nation’s lowest-income renters who already struggle with affording basic necessities.”
Zumper looked at what a renter can get for the median $1,500 rental rate and shared properties ranging from a 200-square-foot studio in Brooklyn to a three-bedroom house rental outside of Atlanta. But Zumper’s Le Louarn believes the lack of affordable rental housing can be tied to the now pensive nature of those unwilling to buy a home with mortgage rates over 7%.
Earlier in May, a Gallup poll found that a record 78% of Americans said they believe it's the wrong time to make a home purchase, the highest level since the polling company began tracking that data in 1978.
“So many renters are just holding still. While home ownership is still a part of the American dream, it’s probably better right now to stay in your current situation,” Le Lourarn said.
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