Rent Prices In These 10 Markets Are Falling The Quickest

Rents in Austin are down 11%, while Raleigh leads the charge for rent increases at 16.6%.

The largest declines in median asking rent prices were in Austin, where asking rents dropped 11%, and Chicago, where asking rents dropped 9.2% from the previous year. Last May, Austin had the highest year-over-year increase in rent prices, at 48%, according to Redfin data. This was a result of tech companies relocating to the area and attracting new high-earning residents at a time when mortgage rates were increasing. In the second quarter of 2022, lead data began to show renters looking to move out of Austin. Now, rent prices are normalizing in the city due to curbed demand. 

Cincinnati saw a similarly significant year-over-year rent increase last May, so rents are normalizing there as well. In Chicago, the rental supply increased during the pandemic as new landlords tried to cash in on high rents, and many chose to rent rather than sell at the tail end as homebuying demand decreased, according to Chicago Redfin real estate agent Dan Close. 

In some metros, rents just keep rising, but even the 16.6% year-over-year growth in asking rent in Raleigh doesn’t come close to the increases shown in last year’s data. A thriving tech scene in cities like Raleigh, Charlotte, and Nashville continues to bring new residents in droves, keeping rent prices inflated even as new residential buildings are erected. 

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Apartment Market Continues to Loosen, Transactions Pull Back Further Amidst Economic Uncertainty

“Apartment operators reported an uptick in vacancies and concessions this quarter,” noted NMHC’s Vice President of Research Caitlin Sugrue Walter. “And while some of this softness can be attributed to seasonality, investors remain concerned about the coming wave of supply in some markets and the prospect of slower economic growth in 2023. Only 11% of Quarterly Survey respondents believe that the Fed will be able to achieve a soft landing this year in its effort to rein in inflation.

“The transaction market, meanwhile, remains at a virtual standstill, with current apartment owners unwilling to offer buyers the lower prices necessary to compensate for both this diminished economic outlook and the elevated cost of debt.”

The Federal Reserve remains committed to bringing down inflation via tighter monetary policy, thereby raising the prospect of slower economic growth. A majority of Quarterly Survey respondents (64%) believed that a “bumpy landing” is the most likely scenario, where growth slows to a below average or negative rate and then rebounds to a sustainable pace. Twenty-one percent of respondents thought that the Fed’s actions will lead to a “hard landing”, or recession scenario, while just 11% predicted a “soft landing”, where economic growth simply slows to a more sustainable pace.

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Mortgage rates rebound after five straight weeks of declines

Rates ticked upward due to a still-resilient economy and pressures from the MBS market

“Mortgage rates are the product of the larger economic environment, including inflation and employment data as well as banking stability and the Fed’s actions,” Hannah Jones, economic data analyst at Realtor.com, said in a statement. “Recent data points to a still-resilient, though cooling economy, leading many to believe the Fed will elect to raise the target rate at next month’s meeting.”  

Mortgage rates are following the gain in the 10-year Treasury, which moved from 3.2% in the first week of April to 3.6% this week, according to George Ratiu, the chief economist at Keeping Current Matters. 

“Investors are weighing the softening consumer sector and inflationary pressures, along with the shifts in real estate markets, looking for more clarity on the outlook,” Ratiu said in a statement. “Inflation remains a concern, keeping the Fed in a hawkish position, poised to push the policy rate up by another 25 basis points at its May meeting.”

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