Rent prices continued to decrease year-over-year for the third straight month, according to a new report from Realtor.com.
Realtor.com’s rental report for July found that the median asking rent in the 50 largest metros increased $15 to $1,759, but remains down $18 from the peak 12 months ago.
The July data also marks the first year-over-year decrease in rent for studio units since 2020, continuing the downward trend led by two-bedroom units in May and one-bedroom units in June. Breaking down the different units, studio rents dropped 0.4% to $1,445, one bedroom rents dropped 0.6% to $1,642, and two bedroom rents dropped 1.1% to $1,948.
Key highlights:
- Nationwide rent was slightly more affordable than July of the previous year. People earning the typical household income and looking to rent would be spending 25.9% of their earnings to lease a typical for-rent home, down from 26.5% in July 2022.
- Vacancy rates still remain below pre-pandemic levels, rent prices are elevated overall, and affordability continues to be a significant issue. Renters in eight of the top 50 metros, for example, pay a rent share higher than 30% relative to the median household income.
- The least affordable markets include coastal and Sun Belt locations, where renters often spent more than 30% of the median household income on housing costs.
- Miami was by far the least affordable rental market, followed by Los Angeles, San Diego, New York City, Boston, Riverside, Tampa and Orlando.
- In three of these eight cities, affordability has worsened compared with last year. In Miami, for example, renters would have spent 44.2% of their monthly paycheck on the typical rental.
- Conversely, Oklahoma City was the most affordable rental market, with renters spending 18.4% of their median household income on housing.
- Other affordable rental markets include midwestern mainstays such as Columbus, Minneapolis, Cincinnati and Kansas City.
- While rents in the South and West remain high, these areas show improved affordability, following a consistent downward rental cost trend during the preceding months.
- The most significant improvement was Riverside, where renters with a typical household income would spend 33.9% of their monthly paycheck on the typical rental; while higher than the 30% affordability threshold, this represents a decline of 3.4 percentage points compared with 12 months ago.
- Meanwhile, strong demand in Midwest markets—such as Milwaukee-Waukesha, Wisconsin; Birmingham, Alabama; and Indianapolis, Indiana—is driving lower vacancy rates and faster rent growth, eroding affordability in more traditionally budget-friendly locations.
Major takeaway:
“Renters in many areas are now spending slightly less on rent relative to their overall income, giving their budgets a little more breathing room at a time of stubborn inflation and ongoing affordability concerns,” said Realtor.com Chief Economist Danielle Hale. “With our midyear forecast update noting a surge in multi-family construction and an uptick in vacancy rates, we anticipate this downward pressure on rent prices will continue, providing many renters with much-needed stability in their housing expenses. Given the current rental market momentum and seasonal trends, it will be very unlikely to see a new peak rent in 2023.”
Realtor.com Economist Jiayi Xu added, “As renters determine their next move, whether it’s to stay put, save up to buy a home, or move and rent in a new location, the rental landscape is showing signs of improvement. To determine if renting remains the right choice for your household, free, trusted tools like our Rent Vs. Buy Calculator or our most affordable markets research can help renters make more informed housing decisions.”
For the full report, visit https://www.realtor.com/research/july-2023-rent/.
