Competition in the rental market is expected to intensify in the spring. However, significant forces pushing down rent inflation remain.
National median rent prices rose 0.6% in March, marking the second straight month of increases after six straight months of declines, according to new data from Apartment List released last week. The current median rent is $1,388.
However, with rental costs falling by 0.8% over the past 12 months, inflationary pressures are likely to continue to ease.
Monthly rents increased in 81 of the top 100 cities in March, but only 42 cities recorded year-over-year increases. Regionally, the Sunbelt has recorded significant rent declines as the influx of multifamily housing has cooled off the market.
A surge in new apartment supply also pushed up the vacancy rate, with the national index reaching 6.7%, the highest since July 2020. This number confirms the trend over the past two years of easing housing occupancy in multifamily housing, and there is no sign of supply slowing down.
Apartment List said in its report that a record number of apartment complexes will be completed in 2023, and “even more new units are expected to come to market this year.”
Rent has a large impact on inflation, and although housing costs have eased month-on-month, they still account for about two-thirds of the annual rise in consumer prices seen in February.
However, the slump in rental prices that began in 2022 is still reflected in the data, with inflationary pressures expected to ease in the second half of this year.
“The Apartment List National Rent Index has proven to be a strong leading indicator of the housing and rent components of the CPI, as our index captures price changes in new leases, which (i.e., what the value of the CPI measure will be),” the report said.
“And while rent growth as measured by our index slowed throughout 2022, the CPI measure continued to rise. However, as we have long predicted, the shelter portion of the CPI increased last year. Official indicators of shelter inflation continue to trend downward, which will also help ease overall inflation. ”
