US Home Rental Prices Fall for the First Time in 2 Years...Will Interest Rate Hikes Become a Variable?

(Photo by AFP)

[Asia Economy Reporter Yujin Cho] The U.S. housing rental market, which saw a sharp rise during the COVID-19 pandemic, has declined for the first time in two years.

On the 26th (local time), the Wall Street Journal (WSJ) cited a report from U.S. real estate data firm CoStar, stating that apartment rental asking prices fell by 0.1% in August compared to the previous month.

This is the first monthly decline in apartment rents since December 2020.

During the same period, Rent.com data showed a 2.8% drop in studio apartment rents, and Realtor.com, an online real estate platform, also indicated signs of rental price deceleration.

Although housing rental prices slightly retreated from their peak, CoStar Group's data shows that rents nationwide last month were still up 7.1% compared to the same month last year.

Therefore, the consensus is that it is still too early to say the housing rental market has entered a sustained downward trend.

Realtor.com stated, "Last month's rent decline is minimal compared to the average increase of 23% since August 2020, and there is no guarantee that rents will not rise again."

Zillow Group economist Offi Dibangai said, "Since many households find it harder to buy homes due to high home prices and rising mortgage rates, rental demand is unlikely to drop sharply."

Since leases are typically signed for one or two years, tenants who need to renew contracts or plan to move soon are likely to face higher costs than their previous agreements.

Experts expect the housing rental market to continue its downward trend for the next few months or at least until the end of the year.

This assessment is based on fatigue from the rapid price surge, increased supply of new apartment rentals, and weakened consumer sentiment. Home prices have risen excessively, making it difficult for buyers to access the market, and due to interest rate hikes, home prices have declined for two consecutive months.

The National Association of Realtors (NAR) reported that the median price of existing homes in August was $389,500, down $10,000 from the previous month ($403,800).

Although August sales prices rose by over 7% compared to the same month last year, this is the smallest increase since June 2020, when the pandemic was at its peak.

Meanwhile, the market is paying close attention to whether the slowdown in rent increases will influence the U.S. authorities' pace of interest rate hikes.