High rent has become a fact of life in Western Washington and across most of the United States. That isn’t likely to change in a drastic way, but as we head into 2023, there are signs that the steadily increasing rental prices of 2022 might be leveling out.
What does that mean for renters and the owners of rental properties? Let’s take a close look at where we’re at, how we got here, and what rental property price trends we are looking at for spring and summer.
Rental Property Price Trends Spring/Summer 2023
Leaving the pandemic behind
The ongoing effects of the COVID-19 pandemic were a huge factor that drove rent prices through the roof in 2022 and into 2023. According to numbers from Rent.com, the U.S. average rental rate spiked from a pre-pandemic low of $1,585 in January, 2020 to a high of $2,053 by August, 2022.
But those kinds of increases can’t go on forever, and the pandemic was only one of several factors that pushed rent higher along with migration, economic woes, and lack of rental inventory. By the end of last year, the rental housing market was already showing signs of moderating.
Will rent decrease in 2023?
The big question, of course, is where will rental rates go from here? According to the Rent.com figures mentioned above, the national median rental price in January, 2023 was $1,942, not exactly a rock-bottom number, but still the lowest median rental price since February, 2022.
Some of the more conservative estimates suggest that rent prices may flatten out or, at the very least, climb at a much slower rate than they did in previous years. But others believe that the cost to rent will actually start falling. Business Insider recently dubbed 2023 as “the year that tenants claw back bargaining power from landlords,” predicting unequivocally that rents are about to fall.
Inflation, a major driver behind pandemic-era rent increases, is starting to level off, which has slowed the increase in rental rates across the country. Perhaps even more significantly, the Fed has continued to hike interest rates in an effort to slow spending and cool inflation.
The result of high mortgage rates has been a dampened housing market. While the housing market has already been cooling since last year, the effect on the rental market is always delayed. Because most renters sign at least a one-year lease, it takes about a year longer for the rental market to cool off after the housing market already does so. This should be a major factor in preventing rent increases later this year.
Supply and demand
Housing inventory has been extremely tight, not just during the pandemic, but for years leading up to it. And while this isn’t something that’s going to completely change overnight, it is starting to shift a little.
An abundance of apartment construction over the last couple of years is resulting in a lot of new rental properties becoming available in 2023. As economist Lawrence Yun recently told the Washington Examiner, this should cause rents to at least stay stable this year.
There are also strong indications that fewer people are moving in 2023. Realpage recently reported a spike in the national vacancy rate for apartments to 5%, perhaps suggesting that many prospective renters are waiting and watching the economy before making any moves.
Contact us today to learn more about the ups and down of the market for rental properties in 2023, and talk to our team about how property management can be a benefit to landlords and renters alike.