If you find yourself burdened by exorbitant rent expenses, this could be a great moment to consider a change. The current situation seems to present favorable circumstances that may lead to a decrease in rental prices.
In May, a decline was reported in median asking rent prices across the USA, marking a significant 0.6% decrease compared to the previous year. This reduction stands as the most substantial drop since March 2020, a time when the rental market experienced significant turbulence. Notably, just a year before this recent decline, rental costs were soaring at a staggering rate of 16.5%.
Now, with a potentially favorable climate for renters, it may be a wise time to explore new housing options and negotiate better rental deals.
Here are 7 reasons your rent is going to decrease in the near future.
1. More homes are being rented out instead of selling
The current real estate market is experiencing a cooling trend, partly influenced by mortgage rates remaining just below 7%. This situation has led numerous homeowners to adopt a cautious approach, prompting them to delay putting their homes up for sale.
Instead of selling their properties, many homeowners are opting to enter the rental market by leasing out their homes. As a result, there has been a noticeable surge in the supply of rental properties available. This increased rental supply has created a unique challenge for landlords: a supply-and-demand issue.
With more rental units flooding the market, the demand for rentals is now confronted with a surplus of available properties. This excess supply offers potential tenants a broader range of choices, giving them more negotiating power when it comes to rental prices.
For landlords, this means they may encounter greater difficulty in raising rent rates, as the competitive market conditions necessitate keeping their rental prices competitive to attract tenants.
2. More homes being built
The construction of multifamily housing has been experiencing a notable upswing, contributing significantly to the overall rental supply. Based to recent market research, there has been a substantial year-over-year increase of 24% in projects involving five or more units on a seasonally adjusted basis.
In concrete terms, this surge in construction activity resulted in the addition of a staggering 400,000 new multifamily units in April 2023 alone. For renters seeking advantageous opportunities, this surge in new construction could bring great news, as it opens up the possibility of finding rental deals in brand-new, freshly built units.
The surge in multifamily housing construction serves to address the growing demand for rental properties and provides a broader range of choices for potential tenants. Newly built units often boast modern amenities, improved energy efficiency, and up-to-date design, making them an enticing option for renters looking for both comfort and convenience.
3. More vacancies
With the rise in rental supply, a subsequent increase in vacancies has been observed. According to data the first quarter of 2023 recorded the most substantial rental vacancy rate seen in the past two years. During this period, approximately 6.4% of rental units across the nation remained unoccupied.
The surge in available rental properties has created a scenario where more units are competing for tenants, resulting in a higher number of vacancies. This trend is likely influenced by multiple factors, including the influx of newly constructed multifamily units, homeowners opting to rent out their properties instead of selling, and the cooling real estate market, which has encouraged many to hold off on listing their homes for sale.
For renters, this surge in vacancies could translate into increased bargaining power and an opportunity to secure a rental property at more favorable terms. With a higher vacancy rate, landlords may be more willing to negotiate rental prices or offer attractive lease incentives to attract tenants promptly.
4. Fewer people moving
The current economic uncertainty, which includes concerns about escalating inflation and the possibility of a recession, is causing a slowdown in people’s mobility. As a result, there is a decrease in the number of individuals seeking to move at the moment. Consequently, the reduced pool of potential renters has had an impact on the rental market, leading to some significant adjustments.
With fewer people actively looking for rental properties, landlords are facing a challenging situation. The limited demand has created a surplus of available rental units, which puts pressure on landlords to attract tenants.
To entice potential renters and fill their vacancies, some landlords are compelled to reevaluate their rental strategies and lower their asking prices for rental units.
This dynamic has created an advantageous environment for those seeking to rent a property. Renters now have more opportunities to find attractive deals and negotiate better rental terms.
Landlords, in turn, are actively trying to make their rental units more appealing by offering competitive pricing and possibly additional incentives to secure tenants.
5. Less demand for homes in urban areas
The trend of remote work has sparked a migration of individuals seeking larger living spaces away from urban centers with high living costs.
As more people embrace remote work, they are finding newfound flexibility in choosing where they reside. Many are opting to move away from densely populated urban areas to areas offering more space and a lower cost of living.
This shift in residential preferences is significantly impacting the rental market in major urban centers.
With a growing number of individuals moving away, there is reduced demand for rental properties in these bustling urban areas. As a result, landlords are facing challenges in maintaining the previous rental price growth rates.
6. Airbnb rentals are getting cheaper
Not only is the conventional rental market experiencing a decline in prices, but the emergence of short-term rental entrepreneurs buying properties is also contributing to this trend by intensifying competition.
With the rise of short-term rental hosts, there is an expanding supply of available accommodations for travelers. This increase in supply has triggered a price competition among hosts, resulting in lower nightly rates being offered in certain locations. Even Airbnb projected a decrease in bookings and a reduction in average daily rates for the second quarter in May.
7. Airbnb’s shifting to long-term rentals
In the last three years, certain long-term landlords made a strategic move by transitioning their rental properties into short-term rentals to capitalize on the growing demand from travelers seeking temporary accommodations.
However, as time went on, the short-term rental market became increasingly saturated with numerous hosts offering their properties to travelers. Additionally, with the easing of travel restrictions and the reopening of international borders after the COVID-19 pandemic, many tourists are now resuming their adventures abroad.
In light of these developments, some of the landlords who had ventured into the short-term rental market are reevaluating their approach. They might decide to shift back to offering long-term rentals once again. As a result, a surplus of vacation rental properties could potentially flood the long-term rental market.
