American renters cannot take it anymore after the country sees a record surge in expenses- from food and energy to housing costs.
The rent increase is now beginning to slow down in many locations that saw a year-long boom and sapped the affordability of many. Landlords have no choice but to hold back the big increase as tenants’ demand is shrinking.
A few months ago, people were scrambling to get hold of that one home. The supply of apartments was limited, and people were willing to pay more or multiple application fees. The post-pandemic boom markets for real estate in places like Phoenix and Las Vegas are thinning out, with the home listings staying longer.
With rising mortgage rates, housing affordability worsened and cooling off in rentals. Another significant reason for this crisis is the rising cost of goods and services, with wages not keeping up with the surge. The threat of recession is making people stay put. The Federal Reserve aggressively hiked interest rates to control inflation.
In September, rents increased 7.5% across the country compared to the year ago. This is above the ore pandemic levels but lower than the peak when it jumped 18% at the beginning of the year. Igor Popov, the chief economist at Apartment List, said that early data in October showed a drop-off faster than any month since 2017.
Federal Reserve is closely watching the cost of housing which accounts for a third of the consumer price index. The rent measure increased at a record pace in September and is yet to show any cool done despite lower rents.
The slow reflection in the index is because it tracks what renters pay and the cost of ownership who rent back their homes rather than the new leases where prices change. The index lags behind the actual market on a real-time basis. According to Moody Analytics chief economist Mark Zandi, it will take around six to nine months to see the effect of the slowdown.
Renters are feeling the pressure thanks to inflation. Homeowners can fix their mortgage for 30 years. Renters have to face rent increases annually or monthly if they have fewer stable jobs and income. An average American has to work 64 hours a week to afford the monthly rent.
Work to Live
With rent becoming unaffordable for many people, fewer leases are being signed. The shrink rental demand in metropolitan areas such as Atlanta, Las Vegas, and Phoenix, where rent growth has been dramatic in recent years.
The slowdown is across the country, with rents declining month on month. In September, 69 out of 100 cities showed falling rents, though, in some areas, the demand is still heated up. Rents in San Diego, Miami, Florida, and New York showed a 12% jump last month compared to the previous year.
