Fortunately for renters considering a move this year, and for those watching the outlook for inflation, rent increases this spring have been slower than usual. Unfortunately for renters in the nation’s largest city, that doesn’t include New York.
At $2,048,
Zillow
‘s measure of the nation’s typical asking rent price in May represents a continued slowing in cost increases after rents soared earlier in the pandemic. Rents nationally increased by 0.6% between April and May, according to Zillow—about even with April’s increase but a slightly slower gain than the 0.7% typical for this time of the year.
Rental growth has been moderating since reaching a high of a 17% year-over-year increase in February 2022, Zillow said. The slowdown indicates that “renters may be tightening their budgetary belts and doubling up with roommates as higher costs and lower excess savings make it less tenable to rent a place of their own,” Zillow senior economist Jeff Tucker wrote in a blog post this past week.
At the national level, Tucker says he expects rents to grow more slowly than they did before the pandemic. That’s a healthy development, he says, “after the year and a half of really overheated growth that we already went through.”
The continued slowing in national rent growth is a positive omen for inflation metrics. The Consumer Price Index subsection measuring the cost of shelter has remained relatively hot, even as increases in asking rents have declined.
The inflation gauge typically lags behind changes in private measures of asking rent because of its methodology, which surveys renters about price changes on all leases, not just new ones. Tucker expects both the Bureau of Labor Statistic’s measure of rent and its measure of owners’ equivalent rent, or what a homeowner estimates it would cost to rent their home, to soon begin to cool on a year-over-year basis.
The fact that rents rose more slowly than usual in May could be welcome news for people considering moving. Renters seeking a new lease “may find that they’ve got a bit more bargaining power than they expected,” Zillow’s Tucker told Barron’s.
There’s one particularly big exception: Rents measured by Zillow in New York City jumped in May, rising 1.2% from the month prior. Of the 50 largest metropolitan areas, New York was among the five with the greatest month-over-month increases.
Of those cities, Providence, R.I., was the only place where month-over-month rent growth exceeded New York’s. Other places with fast-growing rents included Chicago, San Diego, and Columbus, Ohio.
New York’s renter-heavy population means rising costs in the city have the potential to affect a lot of households. Only about a third of residents in the nation’s largest city by population were homeowners in 2021, according to the Census Bureau. “It’s surprising to me how competitive the New York market is,” Zillow’s Tucker told Barron’s.
The city’s strong rent growth “helps to prove that the death of urban life in America’s megacities, or superstar cities, was greatly exaggerated,” Tucker said. Rental demand has been particularly strong relative to supply in northeastern and Midwestern markets, Tucker said.
The same can’t necessarily be said for large cities in other regions. Rents were the weakest in Portland, Ore., data show, where Zillow’s rent gauge was flat with the month prior. Other metropolitan areas with the smallest growth from the month prior include Atlanta, New Orleans, Los Angeles, and Miami.
Write to Shaina Mishkin at [email protected]
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