Housing Market 2023: Rent Prices Are Dropping for the First Time Since the Pandemic
Written by
Seychelle Thomas
Edited by
Cory Dudak
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May of 2023 marked the first year-over-year decrease in rent prices since 2020 according to a new study from Realtor.com. Across 50 major metropolitan areas, studio, one-bedroom, and two-bedroom rentals dropped by 0.5% for a median rent price of $1,739. These numbers are still higher than last month by three dollars and $344 higher than in July 2019.
Rent Price Drops
While a subtle drop in rent prices is welcomed news for renters, this could be a small peek at further decreases in price. Realtor.com estimates that rents will drop by a total of 0.9% in 2023.
Rental units with the largest price drop were two-bedroom properties which dropped by 0.5% or $10 from the previous year. In comparison, studio apartment rents rose by 2%, while one-bedroom apartments saw a slight increase of 0.4% year over year. For renters, this equates to the following median rents by apartment size:Â
- Studio: $1,463
- One-bedroom: $1,628
- Two-bedroom: $1,923
Cost-conscious renters have opted for smaller living spaces as rents peaked in July 2022, which drove demand for studio and one-bedroom apartments.Â
Rental demand falling
Although rental prices have decreased in some cases, affordability is still a chief concern among renters. When deciding to renew a lease or move to a new property, many renters are choosing between a rock and a hard place.
According to the most recent data from the Bureau of Labor Statistics, the average rent increase for a lease renewal was 3.5% in the first half of 2022 versus new tenants who saw rent increase by 12.2 percent. The potential for increased housing costs has led many renters to choose the more cost-efficient option of staying in their current units.
This may reduce competition for renters who are choosing to move. We could also see demand drop as over 450,000 newly completed multi-family units add to the rental market’s supply. As prices are forecasted to continue declining, we could see more renters choosing to forfeit their leases when it’s time to renew.
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