US asking rent hits new high in January – Redfin

Renters across the US faced a 1.1% hike in the median asking rent, reaching $1,964, the sharpest year-over-year increase since March 2023, according to Redfin’s latest report.

This spike, while significant, comes amid signs that the frenzy of rent hikes seen during the pandemic is beginning to stabilize. After a period of rapid growth and a slowdown from mid-2022 to mid-2023, rent growth has steadied, swinging between a decrease of 2.1% and an increase of 2.4% over the last year, a stark contrast to the dramatic swings between 4.8% and 17.7% witnessed the year before.

“Asking rents have flattened because the pandemic moving frenzy is over, and landlords are grappling with vacancies due to a jump in apartment supply,” Redfin said in the report. “The rental vacancy rate was 6.6% in the fourth quarter, tied with the prior quarter for the highest level since early 2021. Vacancies have climbed due to a building boom in recent years.”

Redfin chief economist Daryl Fairweather predicted a peak in apartment completions by 2024.

Despite the cool-off in rent increases, significant drops in asking rents haven’t materialized yet. Landlords are still seeing strong demand fueled by high mortgage rates, and some are enticing renters with one-off concessions like a free month’s rent or reduced parking fees rather than lowering rents outright.

The rising cost of buying a home compared to renting is another factor keeping the rental market buoyant.

“There’s not a huge incentive for renters to buy right now. Asking rents are stable, and while mortgage rates have dipped in recent months, they haven’t fallen enough to make the financial equation of homebuying feasible for many people,” Fairweather said. “If you’re a renter who’s interested in buying but isn’t in a rush, there’s not much downside to waiting for mortgage rates to fall and your savings to grow.”

However, buying could still make sense for those in a position to make a large down payment and planning to stay in their home for at least five years.

A 20% down payment can offset the costs associated with high mortgage rates and eliminate private mortgage insurance fees, potentially making it a good time to buy before the market heats up again with falling mortgage rates.

“Of course, many Americans can’t afford a 20% down payment, though some do qualify for down payment assistance,” Redfin said.

Read next: When will the Fed cut interest rates?

Regionally, the Midwest saw the fastest rent growth, with a record-setting 4.6% increase to $1,437 in January. The Northeast and West also experienced increases, while rents in the South remained steady.

According to Dan Close, a Redfin Premier agent in Chicago, the pressure from high rents is pushing some people towards buying.

“If you’re paying an arm and a leg for rent, why not try to buy and build some equity?” Close noted. “We’ll likely see this trend intensify in the spring and summer when the vast majority of leases end.”

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