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Think rent prices are going up? Think again.
Image source: Getty Images
Rent is becoming cheaper. According to Redfin, median U.S. rent prices peaked in August 2022 at $2,053 and have steadily dropped since. Some cities, like Minneapolis, are dropping prices faster than others.
That’s not to say rent is affordable. Despite shrinking costs, the median U.S. rent is still 4.8% more expensive than last year. Only a handful of cities are bucking the year-over-year trend.
According to Redfin, here are the 10 cities with the most significant drop in rent prices:
Minneapolis, Minnesota (-8.5%)Oklahoma City, Oklahoma (-6.4%)Phoenix, Arizona (-5.0%)Houston, Texas (-4.6%)Milwaukee, Wisconsin (-4.1%)Chicago, Illinois (-3.6%)Baltimore, Maryland (-2.1%)Austin, Texas (-2.0%)Birmingham, Alabama (-1.8%)Los Angeles, California (-1.5%)
Why are rent prices falling?
There are a few possible explanations. Redfin economist Chen Zhao attributes much of the price discounting to a general upward trend in housing construction. He believes rent will continue to fall in the coming months.
There’s more. In 2021, stimulus money flowed thick and heavy, incentivizing folks to flood the rental market. (Update: Six states are still sending out stimulus checks.) With the stimulus well running dry, there is less demand for rental housing, forcing property owners to lower prices.
Another factor is mortgage rates. As the cost to take out a loan rises, buyers flee the market, and homeowners are stuck with houses that don’t sell. These homeowners may list their properties on short-term rental platforms like Airbnb or rent them out otherwise.
Is now a good time to move?
On an absolute basis, rent is expensive. Despite the recent six-month drop, rent is still 20% more expensive than it was two years ago. If you’re only willing to move when costs are historically low, then now is not the time.
However, trying to time the housing market is like trying to predict a coin flip. Much like timing the stock market, you’re apt to lose, especially over the short term. Rather than try to time the market, consider whether you have sufficient savings to move out.
How much rent can you afford?
You may be willing to pay up to move out. I moved out of my parent’s home despite doubling my rent because I had the means and the desire to do so, even though it stretched the budget. The move was worth it; my mental state improved, among other perks.
That said, millions of Americans struggle financially. Many folks don’t have enough savings right now, and 1 in 3 Americans have no savings at all. Consider whether it’s worth moving out if it means living paycheck to paycheck.
Whatever your choice, consider creating a monthly budget or checking out a rent calculator before weighing the move. Budgets give you a clearer insight into your finances. The best budgeting apps make tracking your monthly expenses automatic.
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