Renters have more options and negotiating power than a year ago
Families could finally catch a break on one of the biggest bills they might pay each month: the rent.
The sting of rent inflation hit tenants hard the past two years, due in part to record demand and not enough supply. The surge in monthly rent for a primary residence peaked in March 2023 at 8.8% higher than the year before, according to the Labor Department. Now the outlook for renters is improving on several fronts, despite an increase in prices in December.
Landlords might have to work harder to attract tenants since there has been a wave of new construction and a rise in vacancies. This means tenants are more likely to be offered extras, such as a gym membership or other amenities.
People looking for a new place to rent are now more likely to score deals than in recent years. Those hoping to renew their lease could also have more bargaining power than they did a year or two ago, according to Lesley Deutch, managing principal at John Burns Research and Consulting.
Here are three charts on why prices might soften for renters this year:
Source: Realtor.com
The bidding wars that helped drive up rents beginning around 2022 seem to have subsided, real-estate agents said.
The rise in rents cooled along with overall prices. Rent inflation for studios to two-bedrooms in the top 50 metros declined for seven consecutive months, with the national median asking price falling to $1,717 in November 2023, according to Realtor.com. (News Corp, owner of The Wall Street Journal, also operates Realtor.com.)
In the rent-vs.-buy debate, the math should continue to favor renters, at least in the short term, said Jiayi Xu, economist at Realtor.com. This advantage will likely diminish as home prices and mortgage rates decline.
Renters might also benefit from falling mortgage rates, said Chen Zhao, economist at Redfin. If enough people leave the rental market to buy homes, that could translate into additional rental vacancies and potentially lower rents, she said.
Existing tenants who want to capitalize on a softer market and renegotiate their lease might wish to highlight the benefits of their stay such as saving the landlord the time and costs of screening new applicants, said Xu.
Landlords offer more sweeteners
Share of rental listings with concessions
In recent months, concessions, such as a month of free rent or a parking space thrown in, are on the rise, said Emily McDonald, Zillow rentals spokeswoman.
The share of rental listings offering concessions rose to 32.7% in December 2023, up from 30% in October.
These concessions can lead to savings for renters since they effectively lower the overall costs. Renters might see more concessions such as the reduction or elimination of security deposits and application fees in the coming months, said McDonald.
Neil Gordon feels a tad of leverage to ask for incentives on the home he wants to rent because it is offseason in Augusta, Ga., and said his likely future landlord is asking a premium—$2,500 a month in rent—for the roughly 2,600-square foot house.
He is hopeful he will get several of the concessions he is requesting including free landscaping, pest control and passes to the community pool.
Read the fine print on any concession, said McDonald. For example, a free month’s rent might mean higher prices are baked into the other months.
More rental units hit the market
U.S. multifamily units under construction
Sources: U.S. Census Bureau; U.S. Department of Housing and Urban Development
Nearly one million apartment units are under construction and most of them are set to open during the next 12 months, according to a report from real-estate firm CBRE. Renters should have more options in the coming year.
Even though rental demand is likely elevated due to tight conditions in the for-sale market, the number of new units should keep rents from increasing much, if at all, said Zhao, the economist at Redfin.
Rents are likely to decline in areas such as the Sunbelt due to high levels of construction and record rent increases over the past two years, said Deutch at John Burns Research and Consulting.
This article originally appeared on WSJ.com. Written by Veronica Dagher and Stephanie Stamm.
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