Rent growth decelerated for the fifth straight month, but renters in lower-priced units are still feeling the squeeze as homeownership remains out of reach for most Americans.
Single-family rents increased only 10.2% YOY in September, down from 13.9% in April 2022, according to recent data from CoreLogic.
This is still double the pre-pandemic growth rate, but moving in the right direction.
“High mortgage interest rates may be causing potential homebuyers to hit pause and remain renters, keeping pressure on rent prices. However, the monthly rent change was negative in September, resuming the typical seasonal pattern for the first time since 2019, which could signal the beginning of rent price growth normalization,” said Molly Boesel, principal economist at CoreLogic.
Declining rents are largely benefiting high-price-point renters. Lower-priced rent growth shot up to 12.1% from 8.5% in September, continuing record gains.
At the same time, higher-priced rent growth decelerated at the fastest pace since peaking in April, dropping from 11.1% to 8.9% in a single month.
Renters of lower-priced properties may be tempted to look into buying a home after such a long stretch of rising payments. But Florida researchers say the 100 largest U.S. metros all still favor renting over buying.
At issue is construction. American builders are putting more resources into apartment buildings than single-family homes. Single-family construction has been trending down for months, while multi-family has consistently risen.
Eli Beracha, Ph.D., of FIU’s Hollo School of Real Estate, noted that there simply aren’t enough homes to bring the cost of buying down, so renting remains the most affordable option.
“When looking at the data as a whole and comparing it to the pace of construction, it is clear that we are not building homes for ownership at a fast-enough pace to keep up with the demand for ownership over renting,” he said.
But researchers agree that renters should be careful to leverage their savings for the future. Though buying may still be out of reach, investing extra cash allows renters to build wealth even without homeownership.
“If you’re going to rent and then spend your savings on beer and cookies, you might as well just buy a home despite the current high prices because ownership is at least a forced savings plan,” said Ken H. Johnson, Ph.D., an economist in FAU’s College of Business.
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