Redfin Reports Rents Rose 2% in January—the Smallest Increase in 20 Months

Rhea-AI Summary

In January, the median U.S. asking rent rose 2.4% year-over-year to $1,942, marking the smallest increase since May 2021. This is a significant slowdown compared to January 2022's 15.6% rise. Rental prices dropped 1.9% month-over-month and are down 5.4% from August 2022's peak of $2,053. Key reasons for cooling rent growth include high costs, inflation, and increased supply from new construction and rental properties. Notably, Phoenix and Oklahoma City experienced year-over-year rent declines of 6.7% and 6.3%, respectively. The slowing rent growth is expected to help ease inflation for young adults signing new leases.

Positive

• Median U.S. asking rent rose 2.4% to $1,942.
• Smallest rent increase recorded since May 2021.
• Rent declines in major metros provide potential relief for renters.

Negative

• January's rent increase is significantly lower than January 2022's 15.6%.
• Rental prices fell 1.9% month-over-month.
• Slowing demand due to high costs and economic uncertainty.

Rental price growth is slowing due to increasing supply and waning demand. There are 11 metros where rents are already falling, with Phoenix and Oklahoma City seeing declines of more than 6%.

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) —The median U.S. asking rent rose 2.4% year over year to $1,942 in January—the smallest increase since May 2021 and the lowest level in nearly a year, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. That’s roughly one-sixth the pace of January 2022, when rents were up 15.6% from a year earlier.

January marked the eighth straight month in which annual rent growth slowed. Rents fell 1.9% from a month earlier and were down 5.4% from the August peak of $2,053.

Rent growth is cooling because of slowing demand and growing supply. Demand has slowed due to still-high costs (rents remain 22.5% higher than they were in January 2020), inflation, widespread economic uncertainty and slowing household formation. Rental supply has grown due to an influx of construction in recent years, as well as a recent increase in the number of people opting to rent out their homes instead of sell.

“We’re watching closely to see whether rents start falling year over year. That would be a welcome relief for renters because it hasn’t happened since the onset of the pandemic,” said Redfin Chief Economist Daryl Fairweather. “If rents do start falling on a year-over-year basis, it will mean that renters have more room to negotiate. It may also prompt more landlords to sell their properties because they’re no longer getting a good return on their investment.”

The nationwide rental vacancy rate stopped falling at the end of 2022 and is expected to grow in the coming months as more rentals hit the market, an indicator that rental prices may continue to slow, Fairweather added.

Rent increases were a significant driver of last year’s high inflation, and now, slowing rent growth is expected to help cool inflation in the coming months. In fact, young adults signing new leases now have lower personal inflation rates than the overall U.S. population for the first time in two years, thanks mainly to slowing rent growth.

Rents Declined in 11 Major U.S. Metro Areas

In Phoenix, the median asking rent declined 6.7% year over year in January, the largest drop among the 50 most populous U.S. metropolitan areas. Next came Oklahoma City (-6.3%), New Orleans (-5.2%), Minneapolis (-5.1%) and Houston (-4.9%).

1. Phoenix, AZ (-6.7%)
2. Oklahoma City, OK (-6.3%)
3. New Orleans, LA (-5.2%)
4. Minneapolis, MN (-5.1%)
5. Houston, TX (-4.9%)
6. Baltimore, MD (-4.6%)
7. Birmingham, AL (-3.4%)
8. Chicago, IL (-3.0%)
9. Virginia Beach, VA (-1.8%)
10. Seattle, WA (-1.0%)
11. Austin, TX (-0.4%)

Raleigh Saw the Largest Rent Increase

1. Raleigh, NC (22.5%)
2. Cleveland, OH (17.5%)
3. Indianapolis, IN (14.9%)
4. Charlotte, NC (14.2%)
5. Nashville, TN (9.8%)
6. Kansas City, MO (8.8%)
7. Louisville, KY (8.2%)
8. Milwaukee, WI (7.7%)
9. Jacksonville, FL (7.5%)
10. Providence RI (7.3%)

To view the full report, including charts and methodology, please visit: https://www.redfin.com/news/redfin-rental-report-january-2023/

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, instant home-buying (iBuying), rentals, lending, title insurance, and renovations services. We sell homes for more money and charge half the fee. We also run the country's #1 real-estate brokerage site. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can take an instant cash offer from Redfin or have our renovations crew fix up their home to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 6,000 people.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230210005104/en/

Redfin Journalist Services:

Kenneth Applewhaite, 206-588-6863

press@redfin.com

Source: Redfin

FAQ

What is the current median asking rent in the U.S. as of January 2023?

The median U.S. asking rent rose to $1,942 in January 2023.

How much did rent prices decline in Phoenix and Oklahoma City in January 2023?

In January 2023, rent prices declined by 6.7% in Phoenix and 6.3% in Oklahoma City.

What trend is observed in rental price growth as of January 2023?

Rental price growth is slowing, with the smallest increase since May 2021.

How is the rental market expected to impact inflation in 2023?

Slowing rent growth is anticipated to help cool inflation in the coming months.

What was the percentage drop in median asking rent from the August peak in January 2023?

The median asking rent is down 5.4% from the August 2022 peak of $2,053.