Experts say rent prices for 2023 cooling down

MEMPHIS, Tenn. — Will renters pay more in 2023? The short answer is yes.

But the latest data shows that the rapid pace of monthly increases we’ve seen since the pandemic began is slowing.

According to Zillow, in November 2022 the average rent in the Memphis market came in just under $1,500/month, a 0.5% increase from October.

But nationwide typical rents went down, falling 0.4% month to month --the largest decline in at least seven years.

“What we’re seeing right now in terms of regional variation in rents is that markets that saw the biggest increases and the craziest markets throughout the pandemic are seeing the biggest slowdowns in rent prices now,” said Nicole Bachaud, Senior Economist with Zillow. “The Midwest, including Memphis, didn’t see a lot of growth going off the charts over the last two years and so we’re coming back into a normal market it’s going to look a lot more smoothed.”

Bachaud says Memphis and other markets, like Louisville, Buffalo, and Miami, are still seeing a slight rise in rents, but the overall numbers show huge, monthly spikes that began in November 2020 are no more.

“In some markets we saw 20, 30, 40 percent appreciation in rent prices and so when we’re coming off of those peaks,” said Bachaud.  “These small decreases we’re seeing month to month elsewhere are really just getting us back to normal. Going into 2023, we’re likely going to continue to see prices for rents kind of flatlining maybe from where they are right now.”

In fact, Zillow shows rent growth nationwide has been cooling since February 2022 when it reached a peak of 17.1% year-over-year. Americans’ demand for housing has waned in 2022, after booming in 2021, thanks to higher costs of rent and generally high inflation.

More people are doubling up with roommates or family, pushing up the rental vacancy rate and thereby putting some pressure on landlords to keep rent hikes in check.

“Rental vacancy rates are slowly ticking up and that’s going to help to reduce future rent growth,” adds Bachaud. “We’ve also seen homebuilders transitioning from single family homes to multi-family homes, so apartment complexes and apartment communities that are going to go to renters that is also going to be helpful down the line to reduce the burden and the pressure on rent prices.”

Still, Bachaud admits prices for some renters are still too high.

Zillow shows the U.S. typical rent in Novembers stood at $2,008, an increase of  8.4% from November 2021. The Memphis market in November grew 7.7% year over year.

“That’s a significant increase” said Bachaud. “7% isn’t nothing especially for folks who are resigning a lease who were paying much less than $1,500 for the past couple months and all of a sudden they get that bump in their rent and that is going to be a significant challenge when you’re also faced with other inflationary pressures putting stress on budgets. So this isn’t necessarily an easy thing for people to absorb.

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