Anyone currently renting or looking to rent a property knows that rental prices are volatile and constantly changing. As of right now, rent prices are pretty high, and they continue to increase as inflation goes up. So, this leaves renters wondering—When will rent prices go down? Keep reading as we go over why rental prices are so high and find out if they will go down soon.
Included in this Article
- Why Are Rent Prices So High?
- When Will Rent Prices Go Down?
- Average Rent Prices in the United States
- Tips for Renters: How to Navigate High Rental Home Prices
- Tips for Rental Home Owners
Why Are Rent Prices So High?
Rent prices are undeniably high these days. In the past year, the cost of rent has increased by 4% in the United States. However, the average annual increase was around 3.3% before the pandemic. So, why has rent increased so much over the past year, specifically in the second half of 2021? Let’s look at a few factors to consider.
- Higher Home Prices
- Lower Rental Home Inventory
- Growing Demand for Certain Demographics
- The Aftermath of the Eviction Moratorium
Higher Home Prices
When the price of homes increases, the rent price inevitably increases as well. After all, most landlords determine rental prices by charging a small percentage of their home’s overall value. For example, if a home is valued at $150,000, a landlord could charge anywhere from $1,000 to $1,750 for rent each month.
That said, as the prices of homes continue to increase throughout 2022, rental prices will also increase.
Lower Rental Home Inventory
Low home inventory is not only an issue for potential homebuyers, but also prospective renters. Without an abundance of rental home options, landlords can set a competitive monthly rate for their rentals. As a result, most landlords see the opportunity to charge higher rates.
Few people are moving out of their rentals without as much housing inventory available. As such, this allows landlords to increase rental rates for current tenants due to low availability elsewhere.
Growing Demand for Certain Demographics
As the demand for rental housing grows for certain demographics, the rental prices will likely increase. For example, age groups like Millennials or Baby Boomers are more willing to live in a rental than maintain their own home. This is most likely because Millennials are more focused on their career and development personally rather than maintaining a large home and land.
On the other hand, Baby Boomers are reaching an age where they cannot properly take care of a large home and yard. Therefore, most people reaching retirement age are looking to downsize into a lower-maintenance rental property.
The Aftermath of the Eviction Moratorium
The Eviction Moratorium that took place during the height of the Covid-19 pandemic caused a lot of changes for both landlords and renters. During this time, landlords could not evict tenants from their rentals for nonpayment of rent. This caused huge losses for property owners and investors as they had to continue paying the mortgage, taxes, utilities, and maintenance costs.
Many Washington DC property management companies saw rental rates rise as landlords and investors tried to recoup losses after the moratorium ended. This trend continues to push further as home prices increase and inflation rates rise.
When Will Rent Prices Go Down?
Now, it’s clear that rental rates are rising rapidly throughout the United States. So, when will rent prices go down? Unfortunately, the question is hard to answer, but research shows a few suggestions.
Throughout the Covid-19 pandemic, the housing market has seen significant highs and major lows. For example, we’ve witnessed record-high home prices, with record-low mortgage rates and extremely low home availability.
That said, as we continue to navigate the pandemic, it’s hard to say when prices will settle. But, a few factors could allow increasing rental rates to slow down.
Can Supply Catch Up With Demand?
One factor that could affect rental rates is the housing supply and demand. Throughout 2021 and into this year, we’ve experienced a considerable increase in demand without enough supply to keep up. In turn, this has allowed landlords to set prices higher and create competitive markets.
However, if the supply can catch up with the demand, renters can expect rental rates to decrease in the upcoming year. That said, if we want to see lower rent prices, we may need to construct more rental buildings.
Will More People Purchase Homes?
With skyrocketing rent prices and low rental unit supply, will this bring more people to purchase homes instead? Although buying a home is a goal for many people, the current housing market makes it difficult.
So, as of right now, it looks like many people find more value in renting than purchasing a home at such high prices. Of course, that doesn’t mean that people will resort to only rental home living in the future. But, right now, that seems to be the best option for many people.
Average Rent Prices in the United States
Housing costs in the United States vary state by state. In 2020, the average rental price for a one-bedroom apartment in the United States was $1,098. However, due to the Covid-19 pandemic, prices have increased significantly. Let’s take a look at the highest average rent prices for a one-bedroom unit in some of the largest US cities in 2022.
Highest Average Rent Prices in the United States
- New York, NY – $3,260
- San Francisco, CA – $2,850
- Boston, MA – $2,720
- San Jose, CA – $2,390
- Miami, FL – $2,340
As you can see, these cities have much higher rental rates than the US average. So, how can renters across the US navigate high rental prices? Keep reading for a few tips.
Tips for Renters: How to Navigate High Rental Home Prices
Navigating high rent prices can be frustrating and seemingly unfair for renters looking for somewhere reasonable to live. However, there are some ways for prospective renters to learn about the housing market and make intelligent decisions for their future.
Understand Current Market Trends
The first step to finding a decent rental home is understanding current housing market trends. Before quickly deciding on a place to live, do some research first. Right now, rental rates are highly competitive, so it’s crucial to seek out all of your options before making a rash decision.
Similarly, when you understand current housing trends, you can better understand why prices are so high. So, before you get frustrated at your landlord for increasing rent or declining to lower your monthly rate, consider the market and put yourself in their shoes.
Save Money While Renting
If you can’t afford to purchase a home quite yet, you have the opportunity to save money while living in a rental unit. Although rent prices are currently high, the costs of purchasing homes are higher. So, while you live in a rental home, try to spend money wisely and save what’s leftover. Then, in the long run, if you desire to purchase a house, you’ll have the money for a down payment and starting costs.
Additionally, there are other ways you can potentially save money while renting. For example, work with your landlord. If you offer to do some essential maintenance, such as mowing the lawn or fixing unexpected issues around the unit, you could save your landlord money. In return, they could knock off some of your monthly rent since they didn’t have to hire someone to do the maintenance.
Tips For Rental Home Owners
Keeping up with current rental trends is essential for investors. However, if you own rentals in more than one city or state, it can be hard to determine where you should set your rental rates at. Additionally, many landlords have questions when it comes to setting fair prices. When will rental rates increase? When will rent prices go down?
Consider hiring a property management team if you find yourself struggling to keep up with your rentals. A trusted team like Bay Property Management Group can help you navigate the daily tasks of owning a rental unit.