There is no denying that current rental costs are high. They are approaching record highs in some markets. Rent increases are placing a significant strain on the monthly budgets of a significant number of Hoover renters. And it’s understandable why: listed rents have increased 15% nationally and up to 30% in some cities. Additionally, as many buyers are priced out of the housing market by inflation and rising interest rates, there is a growing pressure to rent. So what’s fueling this trend? And when will rent begin to decrease once more? Here is a look at the current state of rental prices and the reasons why analysts predict a decrease in them soon.
Why is Rent So High?
Rent prices are currently rising due to a number of factors. There are fewer rentals available on the market, a slow rate of new construction, a fiercely competitive residential real estate market, and still-present repercussions from the eviction moratorium during the pandemic. Let us consider each factor in greater detail.
Slow Pace of New Construction. Despite the recent boom in the single-family housing market, there aren’t many new apartment buildings to show for it. This is due to the fact that building single-family homes or high-end apartments is much more profitable for developers than building more affordable units. As a direct consequence, the rental market has been tight for years due to an insufficient supply of new units to meet demand.
High Home Prices. The state of the home buying market is another factor causing rent prices to rise. In many markets, prices have reached all-time highs after steadily increasing for several years. Prospective home buyers now find it more challenging to afford a home due to rising mortgage rates. More people are consequently compelled to rent rather than buy, which raises prices even more.
Fewer Available Rentals. The combination of high demand and low supply has diminished the number of available rental properties on the market. Based on a recent report by Apartment List, the amount of available rental units nationwide has decreased by 20% since 2019. The quantity of units available has decreased even further in some markets.
The Eviction Moratorium. The eviction moratorium is the last factor influencing rental costs. The moratorium put in place last year to safeguard tenants during the pandemic has made it more challenging for Hoover property managers to evict non-paying tenants. Due to their concern that they won’t be able to recover their losses if the tenant doesn’t pay, many landlords are reluctant to rent to new tenants.
When Will Rent Start to Go Down?
You might be curious as to when rental prices will start to decline now that we’ve examined the factors increasing rental prices. It’s challenging to know for sure, regrettably. However, there are indications that the rental market may soon begin to cool. One is that sales of single-family homes are starting to decline. This could result in more people staying in their current homes rather than moving, thereby reducing the demand for rental housing.
The fact that the building of new apartments is finally starting to pick up the pace is another indication that rents may begin to decline. Changes to the tax code that increase the profitability of developing rental properties have contributed to this. Thus, even though it might take a while for these new apartments to go on the market, they should help alleviate the rental market’s limited supply and help keep rent prices in check.
Therefore, there is some hope that relief may be approaching if you are struggling with high rent. To make ends meet, however, be sure to stick to your spending plan and comparison shop.
If you are looking for a better rental situation, contact Real Property Management Victory. We may be able to help you find a quality rental home you can afford. You can view our listings online.
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