Renters might want to take cover—because rental prices are falling.

For the first time since 2020, landlords asked for less than they did a year earlier. Prices nationally dipped 0.5% year over year in May to a median of $1,739 a month in the 50 largest metropolitan areas, according to a recent report from Realtor.com®. Rents fell $38 from the peak in prices last July.

“The biggest takeaway is it’s a great relief for renters who have faced financial hardships over the years,” says Realtor.com economist Jiayi Xu. “It opens doors for renters who want to move to new places to explore job opportunities, but haven’t wanted to do so because of high relocation costs.”

Realtor.com anticipates rents will drop 0.9% this year compared with 2022. While that’s not much of a break, it’s a big departure from the COVID-19 pandemic when rents spiked to new heights. Many tenants were stuck as they couldn’t afford to buy homes as for-sale prices spiked as well.

Competition isn’t expected to be as fierce for apartments going forward as more renters are likely to stay put to avoid pricey moving costs. And with more rental units coming online this year and next year, renters should have more choices, forcing landlords to lower prices or offer incentives to attract tenants.

“Rents will keep falling, but not rapidly,” says Xu. Prices “are still high, so affordability is still a big challenge.”

(Realtor.com looked at rents for studios, one-bedroom and two-bedroom apartments, condos, townhomes, and single-family homes in the 50 largest metros. Metros include the main city and surrounding towns, suburbs, and smaller urban areas.)

Where rents are still rising

Rents might be falling nationally, but there are some parts of the country where tenants may still be hit with an unwelcome increase.

Landlords are still jacking up rents in cheaper parts of the country, such as the Midwest and the Northeast. Meanwhile, rents are falling in the pricier West and in the South where rents had risen sharply during the pandemic.

Prices rose the most in Columbus, OH, where rents were up 9.3% year over year in May. The capital of Ohio was followed by St. Louis, at 7.7%; Cincinnati, at 7.5%; Indianapolis, at 7.3%; and Louisville, KY, at 7.2%.

“These are still affordable areas,” says Xu. “People are considering moving to these areas for affordable homes. That increased demand pushes prices up.”

Meanwhile, Las Vegas saw the largest rent drops, at -6% year over year. Next up was Riverside, CA, at -5.9%; Phoenix, at -5.7%; Austin, TX, at -5.6%; and Tampa, FL, and San Francisco, at -4%.

Smaller apartments are seeing steeper rent increases

Now that folks are returning to their offices and aren’t stuck in their homes all day, space isn’t going for as big of a premium either.

Rents dipped on two-bedroom units but rose for smaller studios and one-bedroom units.

Prices rose 2% year over year for studios, to a median of $1,463 in May. The price of one-bedroom units ticked up 0.4%, to $1,628, while two-bedroom units were 0.5% cheaper than they were a year earlier, at $1,923. The larger units had experienced the largest price increases over the past four years, rising 26.7% over that period, as more tenants competed for extra square footage.

Smaller units are “much cheaper compared to larger units,” says Xu. “The affordability drives demand, which drives up the prices.”

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