U.S. Rent Growth Cools to 7.4% in November: A Market Shift for Tenants and Inflation

U.S. rent growth is slowing significantly, with the median asking rent increasing by 7.4% year over year to $2,007 in November 2022. This marks the sixth consecutive month of deceleration and the smallest annual increase in 15 months, a notable shift from the double-digit growth seen for much of the past year. This cooling trend is expected to continue into the new year, which should help ease overall inflation and may eventually lead to more favorable conditions for homebuyers through lower mortgage rates.

What Is the Current U.S. Rent Growth Trend?

The rapid escalation in rental costs that characterized the U.S. housing market is showing clear signs of moderating. The median asking rent, which reflects the cost of apartments available for new leases during a specific period, reached $2,007 in November. While this is a record high in dollar terms, the rate of increase has halved since the summer. This slowdown follows almost a full year of soaring, often double-digit, price hikes. Based on our experience assessment, this trend is a key indicator of changing market dynamics, influenced by factors like economic uncertainty and a post-pandemic recalibration of housing demand.

Which Major Metro Areas Saw Rents Decline in November?

A clear divergence is emerging across metropolitan areas. In November, 14 of the 50 largest U.S. metros saw their median asking rent fall on an annual basis. This suggests that the cooling is not uniform but is becoming widespread. The most significant declines were concentrated in the Midwest and South.

Which Cities Are Still Experiencing Strong Rent Growth?

Despite the national cooldown, several markets continue to see robust rent increases, highlighting the importance of local economic conditions. These areas are often characterized by strong job growth and relative affordability compared to more expensive coastal cities.

How Will Cooling Rents Impact Inflation and the Housing Market?

The connection between rent prices and the broader economy is significant. Housing costs are a major component of the Consumer Price Index (CPI), a primary measure of inflation. As the growth in asking rents slows, this data will eventually feed into inflation metrics, helping to bring down the overall rate. As noted by a leading economics research lead, "That should ultimately help slow inflation further." This, in turn, could prompt the Federal Reserve to ease its policy on interest rates. Lower inflation often leads to lower mortgage rates, which would improve affordability and potentially attract more buyers back into the for-sale market.

Key Takeaways for Renters and Market Observers

The current data points to a pivotal shift in the rental market. For tenants, the era of extreme annual rent hikes may be subsiding, offering more negotiating power, especially in markets showing declines. Prospective renters should research local trends thoroughly, as conditions vary dramatically by city. While the national median rent remains high, the slowing pace of growth is a positive sign for inflation and long-term housing affordability. The market's trajectory suggests that cooling rent growth is likely to continue, making declines more common in 2023.