Rent prices fell in September, a sign that pressures in the rental market might be starting to abate after months of increases.
A report from Rent.com released on Monday found that rent prices fell by just over 2% from the month before. The national median rent price is now $2,011, the cheapest price recorded since April. The decrease in rents from August knocked more than $40 off the national median price and is the largest monthly decline since last year.
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The decrease is a bit of good news for the economy because the Federal Reserve has been pushing hard to tamp down inflation with historic interest rate increases for more than a year. Even despite the gravity of the rate hikes, rent prices climbed over the summer.
Rising house prices and rents have strained the bank accounts of consumers who have been hit by much higher prices since the pandemic took hold. The latest median rent number is slightly higher than a year ago when inflation was still above 7%.
“Looking forward, if patterns over the last year hold, the monthly drop in rent could indicate a return to normal seasonal price changes that eluded the market during the pandemic,” the report said.
Higher rents have fed into the surging inflation of the past two years. Notably, rent makes up about 7% of the consumer price index, which is the most-cited inflation gauge.
The most recent CPI data showed that headline inflation hovered at a 3.7% rate for the year ending in September. Annual inflation was at its lowest level in June, clocking in at 3%.
The highest year-over-year rental price growth was notched in the Midwest, although rents in that region remain the most affordable in the country, with the median price hovering at $1,435. The Northeast also experienced year-over-year price growth.
“Rents slid in the West as has been the case for several months, dropping 1.61% from September 2022. The South also saw yearly rent declines, albeit lower, at nearly one-third of 1%,” the report read.
Mortgage rates have also soared in recent months as the housing market reacts to the Fed’s barrage of interest rate revisions and the (likely dwindling) possibility of yet another rate hike before the year is over.
As of Friday, the average rate on a 30-year fixed-rate mortgage has soared to 7.69%, according to Mortgage News Daily. Earlier this month, mortgage rates reached the highest they have been in more than two decades.
The higher rates have had ripple effects across the entire housing ecosystem.
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New home sales fell 8.7% from July to August to a seasonally adjusted annual rate of 675,000, according to the Census Bureau. Meanwhile, existing home sales fell by 0.7% from July to August to a seasonally adjusted rate of 4.04 million.
Housing starts, the change in the number of new residential buildings that began construction, fell 11.3% from July to August, according to a report from the Census Bureau. From August 2022, they fell 14.8%, marking the lowest level since June 2020.
