Rent prices inch closer to record levels but show signs of stabilizing

Renters across the U.S. are feeling the squeeze as median asking rents approach record highs, according to the latest data from Redfin.

In May, the median asking rent hit $1,653, just shy of the $1,700 peak from August 2022. The median asking rent is the midpoint of all rental listings on the market, with half of the rents higher and half lower.

“Demand from young renters remains high, as many of them are opting to stay put rather than contend with an increasingly unaffordable homebuying market,” said Redfin Senior Economist Sheharyar Bokhari.

May's data indicates an 0.8% year-over-year increase, marking the second consecutive rise after 11 months of declining rent prices. This number is certainly more modest compared to the wild swings we’ve seen in recent years. Rents rose 17.5% during the pandemic and fell 4.1% in the summer of 2023.

“So far, rent price growth has been limited because there are enough new apartments to meet demand, even in the busiest time of year for the rental market,” said Bokhari.

Rents rise in the Midwest and fall in the Sun Belt

In May, Washington, D.C. led the nation with an 11.1% jump in median asking rent—the highest among the 33 major U.S. metro areas analyzed by Redfin. Hot on its heels were Cincinnati, Chicago, Virginia Beach, and Minneapolis with double-digit gains.

On the flip side, some cities saw rents take a nosedive. Jacksonville, FL experienced the biggest drop at -10.1%, followed by San Diego Austin, Seattle, and Phoenix.

Why the disparity? Cities in the Sun Belt have been busy building apartments for the flurry of Americans who moved during the pandemic. That increase in supply has kept rent prices on the cool side.

On the flip side, rents are climbing in the Midwest. The region hasn't constructed as many new units, and its reputation as the most affordable part of the country is attracting more renters.

Multi-family housing keeps a lid on price growth

While multi-family construction surged during the pandemic, it has slowed to below the 10-year historical average now. Yet, Redfin says a backlog of new units continues to hit the market each month. This steady influx of new apartments keeps price growth in check even with high demand.

Vacancy rates have also helped. The vacancy rate has hovered around 6.6% for the last three quarters, the highest level since 2021.

Even rent feels out of reach now, let alone homeownership

Refin’s data comes when renters are slowly resigning themselves to the idea that homeownership may be out of reach, and they may have to settle for renting. According to a new survey by the New York Fed, a mere 13.4% of renters believe they’ll experience “residential mobility,” or the belief they’ll one day be able to afford a home.

Unfortunately, renters can’t catch a break in either market.

According to a new report by Zillow, the typical American needs to earn nearly $80,000 a year to avoid being “rent-burdened.” That’s up from less than $60,000 a year before the pandemic.