Rents drop annually for first time in 6 years

The median US rent declined from the year-ago level in September, marking the first annual nationwide decrease since July 2012, according to the Zillow Real Estate Market Report for the month.

The median US rent fell 0.2% to $1,440 in September, which translates to $36 in annual rent. Before turning negative in September, rent appreciation slowed for seven consecutive months.

More than half of the 35 largest markets saw rents decrease on an annual basis. Portland, Ore., recorded the biggest decline at 2.7%, with Seattle following with a 2.2% drop. Despite the declines, rents in some markets still increase, with those in Riverside, Calif., rising 3% year-over-year.

Meanwhile, September also recorded a slowdown in home value appreciation. Values grew 7.6% from the year prior to a median of $220,100, compared to the 7.8% annual increase in August.

Zillow said that although home shoppers are benefitted by the slowdown in home value appreciation, it comes as mortgage rates have seen a sharp increase since the beginning of the year. Most of the benefits from slower home value growth have been eroded by the higher interest rates as mortgage payments for the median-valued US home are growing more than twice as fast as home values.

"Today's data are yet another signal that the housing market is easing toward a more normal, sustainable pace after the frenzy of the past three years," said Zillow Senior Economist Aaron Terrazas. "With slowing rents and home value growth, searching for a new home should be somewhat less competitive than it was a year ago, giving renters and buyers a bit of breathing room. Rents remain high by historic standards, but September's modest annual decline in rents should ease some of the pressure pushing higher-income renters to buy.”