Western Markets Experiencing the Largest Rent Drops Nationwide

Renters are beginning to see some relief, with the median asking monthly rent in the 50 largest U.S. metros decreasing -0.5% year-over-year to $1,739, according to the Realtor.com May 2023 Rental Report.

Nationally, rent prices increased $3 from last month, but were down $38 from the July 2022 peak. Realtor.com's 2023 Forecast Update predicts that rents will continue to drop, averaging -0.9% from 2022.

Key Findings:

• May 2023 marks the first year-over-year rent decline for 0-2 bedroom properties (-0.5% year-over-year) observed since trend data began in 2020.
• The median asking rent in the 50 largest metros increased to $1,739, up by $3 from last month and down $38 from its July 2022 peak.
• Rent for 2-bedrooms saw its first year-over-year decline in our data history, while smaller units saw rents increase. Rent by size: Studio: $1,463, up 2.0% ($28) YoY; 1-bed: $1,628, up 0.4% ($6) YoY; 2-bed: $1,923, down 0.5% (-$10) year-over-year.
• Rents in the Midwest are slowing, but continue to increase (4.5% YoY), while rents in the West (-3.0% YoY) and South markets (-0.7%) were lower than a year ago.
• With the release of the mid-year forecast, we expect that the median asking rents will experience a small annual decline at a rate of -0.9% in 2023.

"In May, we saw the first year-over-year decline in rents, a sea-change from the double-digit growth that renters contended with in much of 2021 and 2022. This is yet another sign that rental-driven inflation is likely behind us, even though we may not see this trend in official measures until next year," said Realtor.com Chief Economist Danielle Hale. "Although still modest, a decline in rents combined with cooling inflation and a still-strong job market is definitely welcome news for households."

While rental declines are a positive sign for household affordability, it is important to note that rents are still +24.7%—an estimated $344—higher than the same time in 2019, before the pandemic began.

"Despite the decline in typical asking rents, households who may not have moved in several years are likely to see their rent increase if they're looking for a new home," said Hale.

Western Markets Experience the Biggest Rent Drops
Rent prices in the expensive West are seeing the largest year-over-year declines (-3.0%), with the South close behind (-1.0%). More affordable Midwestern markets continued to increase (4.5%), but at a much slower pace than in previous months. Rents in the Northeast have stayed relatively strong, as low unemployment rates and relatively slow new construction improvements have kept demand high and supply limited. Densely populated markets like New York City (+6.8%) and Boston (+3.3%) have shown resilience.

Rents in South Markets Declined

In May 2023, the median asking-rent for 0-2 bedroom rental properties in the South was 0.7% lower than one year ago, despite a 0.2 percentage point drop in the unemployment rate.

The top 5 metros experiencing the most significant year-over-year rent declines are:

1. Austin, TX (-5.6%)
2. Tampa, FL (-4%)
3. Dallas (-3.6%)
4. Charlotte, NC (-3.5%)
5. Atlanta (-3.1%)

Austin, being recognized as one of the prominent tech hubs in the United States, similarly to its counterparts in the West, saw the most significant decrease in median asking rents compared to the previous year.

Rents in Midwest Markets Continue to See Faster Growth

Rents in Midwest metros continued to see faster rent growth. In May 2023, the median rent growth rate was 4.5%. As the Midwest markets tend to have greater affordability, the stronger growth in these markets likely results from this benefit even as it may reduce existing affordability. In addition, as the unemployment rate decreased from 3.2% to 2.8% over the past 12 months, the stronger job market could also boost the rental demand in this region.

Among the top 10 metros experiencing the fastest year-over-year growth, six of them are located in the Midwest:

1. Columbus, OH (9.3%)
2. St. Louis (7.7%)
3. Cincinnati (7.5%)
4. Indianapolis (7.3%)
5. Milwaukee (6.2%)
6. Detroit (5.1%)

The other four metros are Louisville/Jefferson, KY-IN (7.2%),  New York (6.8%), Richmond, VA (4.9%), and Oklahoma City ( 4.6%).

Forecast Expectations for the Second Half of 2023
In some good news for renters, Realtor.com anticipates that rents will continue to drop, averaging -0.9% year-over-year in 2023. Strong multi-family new construction has helped to improve the availability of units, which is helping to improve prices. This, combined with a number of renters choosing to stay in their units longer in order to save money, will help to reduce rental market competition through the end of the year.

"Looking forward, we expect to see a continued, albeit small, year-over-year decline in rental prices throughout the remainder of the year. Renters may find themselves with more bargaining power and may have better luck finding an affordable unit this year. Meanwhile, landlords looking for help setting rents in a shifting market can find tools from Realtor.com's Avail," said Hale.

To read the full report, including more data, charts, and methodology, click here.