For the sixth straight month, renters have been handed a reprieve of sorts. Rental prices are still declining nationwide—but not by nearly as much as many had hoped.

Nationally, rental prices ticked down 0.3% year over year, to a median of $1,712 a month in January, according to a recent report from Realtor.com®. That made renting exactly $1 cheaper than in December and $46, or 2.6%, less than what tenants paid at the height of the market in August 2022.

The lower prices are due to a boom in apartment construction. With more rental units coming online, some landlords are lowering prices to compete for tenants.

“There is more supply,” says Realtor.com economist Jiayi Xu. “Given the great number of such projects, there will be no new peak in rental prices this year.”

The report looked at rents for studios as well as 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.)

The smallest units saw the largest price cuts. Median rents for studios fell 1% year over year in January, to $1,434 a month. Rents for two-bedroom units came down 0.6%, to $1,892, while one-bedroom rental prices ticked up by just 0.1%, to $1,591.

Where are rental prices rising the most?

Rents aren’t falling by the same amounts in every part of the country. Prices in some Western markets are starting to rebound, and those in the Midwest and pricey Northeastern cities are rising—which means renters in those regions aren’t too happy.

On the brighter side, prices are declining in many Southern markets, where more apartments have been built.

Prices rose the most in the Chicago metro area, going up by 4.2% year over year to a median of $1,852 in January. The Windy City was followed by Indianapolis, up 3.5% to $1,288; Kansas City, MO, up 3.1% to $1,318; San Jose, CA, up 2.9% to $3,217; and Houston, up 2.8% to $1,394.

Rounding out the list were Louisville, KY, up 27% to $1,234; Boston, up 2.7% to $2,981; New York City, up 2.3% to $2,844; Oklahoma City, up 2.2% to $988; Pittsburgh up 1.1% to $1,421; and San Diego, up 1.1% to $2,811.

It isn’t unusual for rents to rise in the city of Chicago and surrounding Cook County, says Nick Libert, owner of Exit Strategy Realty. He added the year-over-year rate increase is as high as 5% to 6% in some neighborhoods.

“The only time rents went down was for a brief period of three to six months during COVID,” says Libert.

Rising costs for landlords, including property insurance, tax reassessments, and the potential for a new local “mansion tax,” are leading to price spikes, says Libert. Landlords are passing these additional costs on to renters.

The proposed mansion tax in Chicago would apply to property sales of $1 million or above. Combine these landlord-related hindrances with a lack of building in the Chicago area, and you’ll understand the corresponding price spike in area rental costs.

“There’s not a lot of new construction,” says Libert. “Because of the increase in mortgage interest rates, people aren’t giving up their current apartments. It’s creating a stagnant market.”

Renters, he says, “are not going to get relief anytime soon.”

Where did rental prices fall the most?

On the other side of the rental coin are a hodgepodge of places where prices are falling the most. They include metros where prices spiked during the pandemic and have been correcting, like Phoenix, Austin, TX, and Miami, as well as traditionally more affordable areas like Memphis, TN, and St. Louis.

The Memphis metro experienced the steepest decline, with prices down 5.5% year over year in January. The median rent in the metro sits at $1,247 a month.

It was followed by Phoenix, at -4% to $1,550; Atlanta, at -3.8% to $1,619; Austin, TX, at -3.6% to $1,547; and St. Louis, at -3.6% to $1,295. Prices were also down in Miami, at -3.4% to $2,373; Riverside, CA, at -2.6% to $2,174; Columbus, OH, at -2.5% to $1,178; Nashville, TN, at -2.3% to $1,613; and Jacksonville, FL, at -2.2% to $1,534.

The post Rental Prices Continue To Fall in 2024, but Just Barely appeared first on Real Estate News & Insights | realtor.com®.