Realtor.com® July Rental Report: A Rising Number of Rentals Drives Down Rent Prices for Third Straight Month

Rents for studio units saw their first year-over-year decline since 2020

SANTA CLARA, Calif., Aug. 21, 2023 /PRNewswire/ -- The Realtor.com^® July Rental Report revealed a third consecutive month of better news for renters in many parts of the country, with a continued decline in year-over-year rent prices for 0-2 bedroom properties, down -1.0% from July 2022, driven in part by a rising rental supply.

The median asking rent in the 50 largest metros increased $15 to $1,759 from June to July 2023, but remains down $18 from the peak 12 months ago. July also marks the first year-over-year decrease in rent for studio units since 2020, continuing the downward trend led by two-bedroom units in May and one-bedroom units in June.

"Renters in many areas are now spending slightly less on rent relative to their overall income, giving their budgets a little more breathing room at a time of stubborn inflation and ongoing affordability concerns," said Danielle Hale, Chief Economist at Realtor.com^®. "With our midyear forecast update noting a surge in multi-family construction and an uptick in vacancy rates, we anticipate this downward pressure on rent prices will continue, providing many renters with much-needed stability in their housing expenses. Given the current rental market momentum and seasonal trends, it will be very unlikely to see a new peak rent in 2023."

Affordability advancing slowly, supported by new supply 
In July 2023, nationwide rent was slightly more affordable than July of the previous year. To be considered affordable, one rule of thumb is that housing costs should fall below 30% of gross household income. In July 2023, people earning the typical household income and looking to rent would be spending 25.9% of their earnings to lease a typical for-rent home, down from 26.5% in July 2022. This positive change can be attributed to a combination of declining median rents and rising median household income. Additionally, increased supply is boosting vacancy rates and helping drive down rents. However, vacancy rates still remain below pre-pandemic levels, rent prices are elevated overall, and affordability continues to be a significant issue. Renters in eight of the top 50 metros, for example, pay a rent share higher than 30% relative to the median household income.

Middle America remains an affordable oasis between costly coastal locations, for now
The least affordable markets in July 2023 include coastal and Sun Belt locations, where renters often spent more than 30% of the median household income on housing costs. Miami, Fla., was by far the least affordable rental market, followed by Los Angeles, San Diego, New York City, Boston, Riverside, Calif., Tampa, Fla., and Orlando, Fla. In three of these eight cities, affordability has worsened compared with last year. In Miami, for example, renters would have spent 44.2% of their monthly paycheck on the typical rental in July 2023. Conversely, Oklahoma City was the most affordable rental market in July 2023, with renters spending 18.4% of their median household income on housing. Other affordable rental markets include midwestern mainstays such as Columbus, Ohio; Minneapolis, Minn.; Cincinnati; and Kansas City, Kan.

South and West affordability improves, Midwest rents rise 
While rents in the South and West remain high, these areas show improved affordability, following a consistent downward rental cost trend during the preceding months. The most significant improvement was Riverside, Calif., where renters with a typical household income would spend 33.9% of their monthly paycheck on the typical rental in July 2023; while higher than the 30% affordability threshold, this represents a decline of 3.4 percentage points compared with 12 months ago. Meanwhile, strong demand in Midwest markets such as Milwaukee-Waukesha, Wis.; Birmingham, Ala.; and Indianapolis is driving lower vacancy rates and faster rent growth, eroding affordability in more traditionally budget-friendly locations.

"As renters determine their next move, whether it's to stay put, save up to buy a home, or move and rent in a new location, the rental landscape is showing signs of improvement," said Jiayi Xu, Economist at Realtor.com^®. "To determine if renting remains the right choice for your household, free, trusted tools like our Rent Vs. Buy Calculator or our most affordable markets research can help renters make more informed housing decisions."

Methodology 
Rental data as of July 2023 for studio, 1-bedroom, or 2-bedroom units advertised as for-rent on Realtor.com®. Rental units include apartments as well as private rentals (condos, townhomes, single-family homes). We use rental sources that reliably report data each month within the top 50 largest metropolitan areas. Realtor.com® began publishing regular monthly rental trends reports in October 2020 with data history stretching back to March 2019.

With the release of its July rent report, Realtor.com® incorporated a new and improved methodology for capturing and reporting more comprehensive rental listing trends and metrics. The new methodology is expected to yield a cleaner, more representative and more consistent measurement of rental listings and trends at both the national and local level. The methodology has been adjusted to better represent the true cost of primary housing for renters. Most areas across the country will see minor changes with a smaller handful of areas seeing larger updates. As a result of these changes, the rental data released since July 2023 will not be directly comparable with previous releases and Realtor.com® economics blog posts. However, future data releases, including historical data, will consistently apply the new methodology.

Rental affordability analysis: The affordable monthly rent is calculated by applying the 30% rule to the estimated 2023 monthly median household income nationwide ($6,793 across the 50 largest U.S. metros, on average) and in each metro. The monthly median household income is derived from the annual median household income data sourced from Claritas. Due to the methodology changes noted above, Realtor.com® has made historical revisions to its prior affordability analyses. For our most recently published affordability analysis on February 2023 data published in March 2023, the national rent-to-income share has been updated to 25.1%.

About Realtor.com^® 
Realtor.com^® is an open real estate marketplace built for everyone. Realtor.com^® pioneered the world of digital real estate more than 25 years ago. Today, through its website and mobile apps, Realtor.com^® is a trusted guide for consumers, empowering more people to find their way home by breaking down barriers, helping them make the right connections, and creating confidence through expert insights and guidance. For professionals, Realtor.com^® is a trusted partner for business growth, offering consumer connections and branding solutions that help them succeed in today's on-demand world. Realtor.com^® is operated by News Corp [Nasdaq: NWS, NWSA] [ASX: NWS, NWSLV] subsidiary Move, Inc. For more information, visit Realtor.com^®.

Media contact: press@realtor.com

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SOURCE Realtor.com