NEW YORK (AP) — Rents are starting to decline after soaring to record levels last summer, but experts are uncertain whether the slowdown will continue.
Christopher Mayer, a real estate professor at Columbia Business School, said those looking for an apartment now may have a better experience than they did in May or June.
“We don’t see rents going up as fast, the rental market is softening a little bit,” he said.
The national average asking rent rose 14% in July from a year earlier, the smallest annual increase since November 2021, according to a new report from Redfin. Although this percentage is still high, it has decreased from 15% in June and 16% in May.
Experts say the market could slow further towards the end of the year, but there is still much uncertainty.
“I wouldn’t be surprised if we get to 2023 before things really get back to normal,” said Brian Carberry, senior director of Rent.com, an apartment search site owned by Redfin.
A lot depends on where you live. Florida cities such as Boca Raton and West Palm Beach have seen rents drop -0.1% and -0.5% respectively compared to last month. But according to Apartment List, rents in coastal California cities like San Diego have continued to rise over the past year.
In Rochester, New York, rents rose 15.3 percent in August from a year earlier, according to data from Apartment List. An average two-bedroom apartment in the Rochester area was $1,318 in August, compared to $1,116 a year ago.
Bank of America CEO Brian Moynihan said high rents are a concern because they can represent a large portion of a household’s pay.
“Gas prices are down again, but rents are going up 10, 12, 15 percent. And rent can end up taking 40 percent of those households’ income,” Moynihan said in a recent Associated Press interview.
While things look a little better for renters than they did a few months ago, it’s still a landlord’s market, Mayer said.
If your lease is up, staying and negotiating with your landlord may be a better option than trying to move, at least until the rental market slows further, said Paula Munger, assistant vice president for research and analysis. of the industry at the National Association of Apartments.
“When you’re renewing your lease, you’re definitely not paying the same as someone new moving in,” Munger said. “If you can, stay in your apartment.”
A major reason for the rent increases is growing demand from people being punished by a booming housing market. That market is starting to slow, which could mean more people can afford to buy and won’t need to rent, but with interest rates rising, some may not want to take on mortgages.
“With inflation now across the market, there’s not enough supply, so prices are going up,” Munger said. “That’s the downside for people, they just don’t have enough choices and options for what they would like in a housing unit.”
That was the experience of Erika Tascon, a 22-year-old Los Angeles resident who lived with roommates but wanted to find an apartment with her boyfriend.
After visiting more than 10 units, the couple settled on a 500-square-foot one-bedroom apartment in Beverly Hills where they pay $2,750 a month. The median rent for a one-bedroom in the area is $2,773, up 14 percent from last year, according to Zumper data.
“I think the landlords are taking advantage of the tenants right now,” said Tascon, who pays $200 more a month than she did for her previous apartment.
In Britni Eseller’s case, high demand meant she had to rush to fill out her application to beat out the 10 other people who toured the apartment she wanted.
“Because everybody’s in a state of scarcity, you’re willing to find a place that might be somewhat affordable, and unfortunately you’re OK with seeing the floors or a broken appliance,” said Eseller, who lives in North Park, a neighborhood of San . Diego.
Developers have stepped up construction of apartment buildings this year, which could eventually help ease the crisis. But it is likely to take some time before this is reflected in the market.
Meanwhile, high rents disproportionately hurt low-income residents across the country, said Ben Martin, director of research for Texas Housers, a housing justice nonprofit.
In May, rental prices in Dallas and Fort Worth rose 21.6% from a year ago, according to data from Redfin. In Austin they increased by 48.4%. One major reason is that high-income people from coastal areas like California and New York moved to Texas during the coronavirus pandemic when they realized they could work remotely and live more cheaply. In December of last year, for example, Tesla moved its headquarters from Silicon Valley to Austin.
“People who have the lowest incomes pay more of their total pie,” Martin said. “Which means they don’t have money for anything else: school supplies, groceries, gas, clothes, all the essentials you need to live.”
In addition to cutting basic expenses, renters are also cramming more people into apartments, Martin said.
Increasingly, people cannot afford their homes and are now facing eviction. Governments have ended eviction moratoriums and rental assistance programs that allowed people to stay in their homes during the pandemic.
The Eviction Lab, a research organization at Princeton University, is seeing record numbers of evictions that have surpassed pre-pandemic levels.
In Houston, where the eviction moratorium expired in July 2021, there were 7,242 eviction filings in July of this year, 51 percent above average, according to The Eviction Lab. Other cities such as Los Angeles have extended their eviction moratoriums until the end of this year.
Tenants who can’t afford rent increases but can’t afford to move often have to choose between paying rent and meeting basic needs. An eviction stays on the tenant’s record, making it harder to find housing in the future.
“The threat of eviction is the looming problem,” said Nick Graetz, a postdoctoral research associate at The Eviction Lab. “Part of the reason tenants sacrifice so many other things to try to pay unreasonably high rents every month is because of the constant threat of eviction.”
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