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Rents in the US May Have Finally Peaked

Rent growth is expected to slow down after the Federal Reserve raised interest rates to the highest level since 2008, according to Redfin deputy chief economist Taylor Marr.

September 22, 2022
4 minutes
minute read

According to real estate brokerage Redfin, US asking rents rose in August by the slowest pace in a year, a sign that the hot rental market could finally be cooling.

Asking rents across the country have reached a new high of $2,039, up 11% from last year. Although this is a significant increase, it is down from the peak in March, when rents saw an annual jump of 19%. The month-over-month growth of 0.4% is the slowest since December 2021, and down from 1.6% a year earlier.

Rent growth is expected to slow down after the Federal Reserve raised interest rates to the highest level since 2008, according to Redfin deputy chief economist Taylor Marr.

Marr said that higher interest rates have a negative impact on the rental market, because they reduce spending power in the economy as a whole, including renters’ budgets.

Home values have soared during the pandemic buying frenzy, which has squeezed the supply of rental units. However, Marr said that nearly a million rental units are currently under construction, which is likely to ease the growth in rent prices.

Rents in these metro areas are rising faster than anywhere else.

Smaller metro areas were hardest hit by the recent surge in rents. Cincinnati saw prices rise the fastest, increasing by 26% compared to last year. Pittsburgh, Indianapolis and Nashville, Tennessee all saw annual rent increases above 20%.

Suburbs around New York City were also affected by the rising rents in Manhattan. Apartment hunters seeking relief from high rents moved farther outside Manhattan, into the suburbs. The New York area, which for this report included the five boroughs as well as Nassau County, Newark and New Brunswick, New Jersey, saw rent rise approximately 18% year-over-year.

Meanwhile, four of the 50 most populous metro areas saw rents decrease in August. These areas include Milwaukee, Minneapolis, Jacksonville, Florida, and Baltimore.

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