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As rental markets experience a cooling trend, renters may find themselves in a shifting landscape where prices are moderating rather than sharply declining. Whitney Airgood-Obrycki, a senior research associate specializing in affordable housing at the Joint Center for Housing Studies of Harvard University, notes that while rental markets are cooling in many areas, it doesn’t necessarily indicate a plummet in prices but rather a deceleration in growth.
The recent decline in rental costs comes on the heels of record-high asking prices, signaling a potential reprieve for renters. According to real estate data from Redfin, the median U.S. asking rent price dipped to $1,964 as of December, marking a 0.8% decrease from the previous year. This decline follows a pattern of consecutive monthly drops, indicating a shift in the rental landscape.
Susan M. Wachter, a professor of real estate and finance at The Wharton School of the University of Pennsylvania, explains that the easing rents are indirectly influenced by an increase in supply, particularly in higher-end apartment units. This “filtering-down effect” suggests that the influx of new builds, predominantly upscale units, will eventually impact rents across the board.
However, Wachter emphasizes that significant improvements in rent affordability across income levels will require time as the market adjusts to increased supply and decreased demand. Most new construction tends to focus on professionally managed Class A apartment buildings, catering to higher-end renters. This trend contributes to a “filtering-down effect,” wherein tenants in these premium units may opt to upgrade, thereby stabilizing prices in those units and creating vacancies in Class B and C properties.
As rental markets continue to evolve, renters should remain vigilant and adaptable to changing conditions. While cooling markets may offer some relief, long-term affordability hinges on sustained efforts to address housing supply and demand dynamics across all income levels.