Rent price growth is slowing down

Single-family rent growth slowed in January, but prices came in 28% higher from pre-pandemic levels, pointing to spillover pressure from a tight sales market, according to Corelogic.

Rent prices grew 2.6% on an annual basis in January, slowing by almost three percentage points from 5.5% to start 2023. Growth decelerated from a similar 2.8% mark in December.

Across various price tiers, the pace of rent increases came in at a level between 2.8% and 3% in January as well, Corelogic found.

But the year-over-year numbers don't fully reflect changes in the rental market since the beginning of the pandemic, said Molly Boesel, principal economist at Corelogic.

"While annual U.S. single-family rent growth was a moderate 2.6% in January, that increase built on years of above-trend annual gains," Boesel said in a press release. In the four years since February 2020, rents have risen overall by approximately 28%. 

Prices surged in part due to a sluggish purchase market characterized by limited inventory that is leading potential homebuyers to remain in their current units or look for single-family rentals, Corelogic said. 

"Furthermore, while rent growth is slowing, costs are still increasing across most of the country. The median rent on a three-bedroom property increased by over $100 in the past year and by more than $500 in the past three years," Boesel added.

By comparison, average prices for existing-home sales maintained their climb upward at an even more rapid pace in late 2023, as buyers responded to what turned out to be a pullback in mortgage rates. Increased demand for homes helped drive prices up year-over-year by 5.5% in December, according to the Corelogic Case-Shiller home price index. 

The lowest and highest rental-price tiers, defined as properties charging 75% or less or 125% or more than local median values, mirrored the national spike. Rent growth in those tiers rose by 29.5% and 26.9%, respectively, since early 2024, Corelogic found. But all four rental-price levels slowed their pace of increase from a year ago. 

Last month, Corelogic predicted rent growth to range from 2% to 4% throughout 2024.

Among 20 leading markets tracked by the real estate data and analytics provider, Honolulu recorded the highest year-over-year rise at 6%. Seattle and New York followed with prices accelerating by 5.2% and 5.1% compared with January 2023. 

Four cities registered annual rent declines, led by Miami and Austin, Texas, which saw similar drops of 2.4% and 2.3%. Rental costs in New Orleans and Minneapolish also fell by 1% and 0.9% in January.