Rental prices continue to tumble nationally, particularly in the places that saw the largest surges in prices.

In August, the median rent in the 50 largest metros dropped 0.6%, to $1,752 a month. That’s also down $7 from July and $25 from 12 months ago, according to a recent Realtor.com® report. It was the fourth month in a row of year-over-year rent declines for studios and one- and two-bedroom properties.

While monthly rental costs are coming down, Realtor.com economist Jiayi Xu stresses that rents are still above pre-pandemic levels. It was 23.7% more expensive to rent a home in August than it was just four years earlier, according to the report.

“That means rent affordability is still one of the biggest challenges faced by renters—particularly for low-income people,” she says.

The report looked at rents for studios and 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.)

Nationally, the rent decline was expected, says Xu, because of the increasing number of rental properties on the market. Builders have been putting up scores of new apartment buildings as those priced out of homeownership are renting. She expects this trend to continue until at least the end of 2023.

Where rents have fallen the most

Nationally, rental prices dropped most in the metropolitan areas where rents spiked during the COVID-19 pandemic, including Austin, TX, Phoenix, and many Florida markets.

Rents fell the most in Austin, at -8% year over year in August. The metro was followed by Tampa, FL (-5.5%); Dallas and Raleigh, NC (both -5.4%); Portland, OR (-5.2%); San Francisco (-4.9%); Orlando, FL, and Riverside, CA (both -4.8%); Las Vegas (-4.6%); and Phoenix (-4.5%).

“Sellers got used to the fair value of homes being inflated, so they were not going to sell for less than [what folks] got during the frenzy,” says Stephanie Douglass, co-founder of Open House in Austin, a real estate brokerage that works with first-time homebuyers. “Instead of lowering prices, sellers [have been] renting [out their] properties, which flooded the rental market.”

The extra inventory of rental properties helped to bring down prices. Size also played a factor.

Prices for two-bedroom units, the more expensive rentals, dipped the most. They decreased 0.7% year over year in August, to a median of $1,948 a month.

One-bedroom prices ticked down about 0.5%, to $1,634 a month, while studios notched the smallest reduction of just 0.2%, bringing rents down to $1,463 a month.

Where rents are increasing the most

In a turnaround, areas known for their affordability—the Midwest and South—are seeing some of the largest increases in rent.

The biggest bump was in New York City, one of the cities that was emptied out during the worst of the pandemic. The metro has since rebounded with rents up 6.5%, to a median of $3,097 a month.

Most of the rest of the places experiencing increases were in the Midwest as folks seek out savings and more affordable housing.

Cincinnati had the second-largest jump, at 6.2%. It was followed by Richmond, VA (5.9%); Washington, DC (4.9%); Louisville, KY (4.4%); Milwaukee (4.3%); Indianapolis (3.9%); Oklahoma City and Pittsburgh (both 3.4%); and Detroit (3.3%).

“People are moving out from an expensive market to the more affordable Midwest,” says Xu. “Now, the rent in the Midwest is growing at a very fast rate.”

The post Looking for a Cheap Lease? Rents Are Falling the Most in These Places appeared first on Real Estate News & Insights | realtor.com®.