In a welcome relief for tenants, rents began falling in earnest in November in some formerly red-hot real estate metros.

Arizona, Florida, and Texas saw massive rent increases in many cities during the COVID-19 pandemic. But now rent is beginning to decline in some Sun Belt cities for the first time in nearly two years, according to a recent Realtor.com® report that looked at rental prices in the nation’s 50 largest metros. Rents fell in places like Phoenix, Tampa, and Austin in November compared with a year ago—a big difference from the past few years of ever-increasing costs.

Rents are still growing nationwide, but they’ve slowed significantly from a peak reached in January. The growth rate hit its lowest point in over a year and a half in November, rising 3.4% year over year to reach $1,712 a month. While any hike is unwelcome news for renters, it’s much lower than the 17.4% annual surge at the start of the year.

“The rental market continues to cool down, which is a relief,” says Realtor.com economist Jiayi Xu. “But the rent is still higher than this time last year, which means there will continue to be affordability issues.”

In spite of the slowdown, rents are still considerably higher than their pre-pandemic levels nationwide. The median rent in the top 50 U.S. metros is $308 more than it was at the same point in 2019.

This Realtor.com rental report was based on rental listings of studios and one-bedroom and two-bedroom units listed on Realtor.com. National rent on average was found by averaging median rents for each of the nation’s top 50 metropolitan areas. (Metros include the main city and surrounding towns and smaller urban areas.)

Sun Belt metros see declining rents

Sunny cities in the South are leading the march back down toward a more normal asking rent. All of the metros where prices fell were in the Sun Belt.

“They are cooling faster than all the other parts of the country. One of the major reasons: We’re almost at the end of the pandemic, and people are moving back to big cities like New York or Boston,” says Xu. “The moving trend has changed, people are moving back from cheaper areas into big, urban cities.”

Riverside, CA, led the pack with a -5.5% rent growth between November 2021 and 2022. Las Vegas (-4.9%) and Sacramento, CA (-4.8%), were close behind. Overall, Sun Belt metros still saw a year-over-year growth in rents, but the rate of less than a percent was well below the national average.

Small comfort for renters

Rents are expected to continue to grow, just at a slower pace than the rapid leaps seen over the past two years. The supply of homes available for renters is limited by the lack of new construction and the influx of would-be buyers who can’t afford a home of their own due to high for-sale prices and mortgage interest rates. Fewer buyers mean more renters, and more renters increase demand for whatever is available, likely feeding into continued rent growth in the short term.

However, a recent focus on multifamily residential buildings on the part of developers might relieve some of the pressure created by a larger overall market of renters, eventually leading to a decrease in median rents.

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