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Rent prices fell to their lowest level in over a year – a sign that ballooning housing prices from the pandemic are now starting to deflate, according to Redfin data.
The median US asking price for rent in March dipped 0.4% from a year ago to $1,937, marking the first annual decline since the pandemic and the level in 13 months, the real estate firm said in a recent note.
The decline is largely due to excess supply of multifamily units that were built during the pandemic years, the firm said, when ultra-low interest rates made the cost of borrowing more affordable.
But rising inflation and fears of an incoming recession have hindered demand for rental units, which have weighed heavily on rent prices in major cities like Austin, Chicago, and New Orleans.
"Rents are falling, but it feels more like they're just returning to normal, which is healthy to some degree," Redfin real estate agent Dan Close said in a statement, pointing to when rents soared in the wake of the COVID-19 crisis. "Rents ballooned during the pandemic, and are now returning to earth."
The trend is backed by earlier data from Moody's, which found that rents this year for multifamily units have declined in 76% of housing markets.
In the previous two years, rents surged because incomes grew and millennials started families, Redfin explained. But household formation is slowing as economic uncertainty causes more people to stay put rather than move, it added.
The decline in rent comes amid a precarious time for the US housing market in general, with home prices also starting to cool off from their pandemic highs.
Despite easing in recent weeks, rates on the 30-year fixed mortgage are still hovering near a 20-year-high, which has hurt housing demand and suggests prices will see a major correction, economists say.
Home prices over the past year have plunged as much as 12% in certain areas of the country, according to data from Black Knight.
