Can renters catch a break? It depends on mortgage rates and the Fed, says expert
The cost of renting in the United States continues to rise. In February, the median asking rent reached $1,981, a 2.2% increase compared to the same time last year, according to a new Redfin report.
This marks the largest year-over-year gain since January 2023. On a month-over-month basis, asking rents rose 0.9%. The report noted that low rent prices in February 2023 and the influence of mortgage rates likely contributed to the significant percentage increase.
Redfin chief economist Daryl Fairweather attributed the rise partly to elevated mortgage rates.
“Mortgage rates ticked back up in February—a disappointing development for prospective homebuyers, who just a few months ago got a glimmer of hope as rates finally started to fall,” Fairweather said. “With rates still elevated, many are opting to continue renting, which is buoying rental demand, and as a result, rent prices.”
However, there’s potential for change later this year. The Federal Reserve may lower interest rates, making homeownership more attractive and possibly causing a dip in rental prices.
February’s numbers, while indicating a rise, are comparatively stable against the extreme fluctuations of the past two years. Pandemic-driven market shifts caused rents to surge before significantly slowing in 2022 and even declining year-over-year in 2023.
Despite the recent stabilization, renters face affordability challenges. The current median rent is still 24.3% higher than in February 2020, just before the pandemic.
Regional differences in rents
Rent increases varied across the US. The Northeast saw the most significant jump, with a 5.2% yearly increase to $2,481 – the largest gain in nine months.
The Midwest saw rents rise 4.9% to $1,441. In contrast, the South experienced a minimal increase of 0.3% ($1,635), while the West saw a slight dip of 0.1% ($2,349).
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“The Northeast and West have been nearly tied for the most expensive rental region for much of recent history but switched spots over the last year; the West was the priciest region for much of the pandemic homebuying frenzy, but the Northeast reclaimed the top spot in November 2022 and has held it ever since,” Redfin noted in the report. “Rents are likely holding up best in the Northeast and Midwest because those regions haven’t been building as much as the South and West, meaning landlords aren’t under as much pressure to fill vacancies.”
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