The national index for one- and two-bedroom rentals remained flat month-over-month, pointing to a possible inflection point between supply and demand following several months of near-flat rent increases. One-bedroom rentals remained unchanged (0.0%) from January 2023 at $1,492 per month, while two-bedroom rentals increased just 0.1% to $1,824, respectively.
Zumper monthly rent data provides insights to where the Consumer Price Index is heading. Year-over-year rent-price increases continued to decelerate from post-pandemic-era increases in 2021 and 2022. However, average rents for one-bedroom rentals still increased 7.3% year-over-year (YOY), while the average rent for two-bedrooms increased 6.8% YOY. By comparison, rents for one- and two-bedroom rentals had increased 12.8% and 13.8% YOY from 2021 to 2022, respectively—a good sign for renters if the trend continues.
San Francisco reclaimed the #2 spot and New York City prices continue to drop. Just four months after SF was was unseated by Boston, it has taken back its spot at #2, while San Diego, CA moved up the list to #7, swapping places with Washington, D.C. on the Top 10. In New York City, one- and two-bedroom rentals decreased 3.8% and 3.6%, respectively.
This month’s Risers and Fallers tell of a new normalization in rent. Spotlight on Urban Honolulu, Hawaii which saw this month’s greatest increase in rents month-over-month (MOM) for a one-bedroom home to $1,870-per-month, an increase of 6.3%, while Syracuse, NY saw the greatest decrease, down 6.5% to $860-per-month for a one-bedroom.
The Rental Market Reaching an Inflection Point
While rent increases have slowed month-over-month, they remain higher than last year.
The national index for one- and two-bedroom rentals remained flat month-over-month (MoM); one-bedroom rentals remained unchanged (0.0%) from January 2023 at $1,492 per month, while two-bedroom rentals increased just 0.1% to $1,824, respectively. Nationwide, 37% of the U.S. markets on Zumper’s top 100 list saw only modest changes of +/- 2% MoM for one-bedroom rentals—while 41% of markets saw similar increases—or decreases of +/- 2% for two-bedroom properties.
While rents have remained relatively flat MoM since October—a trend that is typical starting in the colder months when people are less likely to move—rents remain significantly higher year-over-year (YOY). Average rents for one-bedroom rentals increased 7.3% year-over-year from $1,393 to $1,492; while the average rents for two-bedroom rentals increased 6.8% year-over-year from $1,708 to $1,824. That said, the positive news for renters today is that the percentage increases YOY are significantly lower than they were last year. By comparison, 2022 rents had increased 12.8% and 13.8% YOY for one- and two-bedroom rentals over 2021, respectively.
This trend can still be attributed to the unpredictability of the U.S. economy. While inflation has hovered around 6.5% in recent months, and the U.S. continues to historically low unemployment rates below 3.4%, news that the Fed may continue to increase interest rates has kept homebuyers on the sidelines, causing increased competition among renters.
“Many markets continue to either normalize or correct following the steep increases in rent seen in 2021-22 in the zero interest rate & QE environment we went through,” said Zumper CEO Anthemos Georgiades. “With interest rates expected to rise further in 2023, we anticipate continued deceleration in rent rises as new household formation freezes or is at least postponed.”
Landlords have remained bolstered by the nation’s tight sales market caused by historically low inventory and more recently, higher interest rates. The flattening of rents month-over-month may suggest that the rental market is beginning to reach an inflection point, which may result in the further normalization—or deceleration—of rents. However, fears over a pending recession, persistently low for-sale inventory, and news of interest rate hikes continue to cause uncertainty.
Zumper’s Monthly Data on Rents Provides Insights to Where Consumer Price Index is Heading
Produced monthly by the The Bureau of Labor Statistics (BLS), the Consumer Price Index (CPI) is a measure of the average change overtime in the prices paid by urban consumers for goods and services, including rent. Since the Cost of Shelter CPI uses existing paid rents, among other data points, as part of its calculation, while Zumper measures ‘true’ market rents, there is a lagging nature to the CPI’s shelter cost component.
In January, the CPI increased 0.5% over December. The BLS cited the cost of shelter as the leading contributing factor towards that gain. Over the same period, Zumper’s national rent index has shown a cooling off of rent prices over the past several months. While not a perfect comparison, we believe Zumper’s national rent index signals a clear indication that the CPI, especially when driven by shelter costs, will also start to decelerate in the next few months.
“In the past, there was a clearer geographic picture of which markets you might expect to see rents rise and fall in based on migration and development trends, especially when paired with office and residential rent increases,” added Georgiades. “What we’re seeing now is that each market is unique, though by and large, monthly rents continue to remain flat—until the record supply of new development becomes readily available this year, the current lack of housing stock continues to pose as a challenge for local and state officials, who are now trying to find and fill affordable homes as quickly as possible.”
Risers and Fallers: New Normalization in Rents
Nationally, 20% of markets on Zumper’s top 100 list saw the prices of one-bedroom rentals increase by 4% or more per month, the majority of which are located in Sun Belt states and across the Midwest. Similarly, nearly 20% of major U.S. major markets saw the prices of one-bedroom rentals decrease by 4% or more. This indicates that while rents increases seem to be cooling off nationally, many markets continue to see healthy, marginal increases and decreases as we head towards a new normalization in rents.
San Francisco Reclaims #2 on Most Expensive Cities List and NYC Prices Down for Fifth Month in a Row
Among the perennial top-10 most expensive cities nationwide, San Francisco reclaimed the #2 spot from Boston, which has seen YOY increases of 10.7% among one-bedrooms and 9.4% for two-bedrooms. This points to a possible inflection point for rents in Beantown as its ongoing housing crisis remains exacerbated by prohibitive zoning laws that favor single-family homes. In addition, San Diego, CA moved up the list to #7, swapping places with Washington, D.C. on Zumper’s list.
Interestingly, one- and two-bedroom rentals in New York City decreased 3.8% and 3.6%, respectively, while rents in nearby Jersey City, NJ saw MoM increases of 4.9% and 4.8%, highlighting the continued migration of renters from Manhattan seeking more space and lower cost of living.
However, one- and two-bedroom rentals have increased significantly in NYC YOY (+14.5% and +21.2%) while one- and two-bedroom rentals YOY in Jersey City have decreased significantly (-6.0% and -18.9%), which may signify just how much rents needed to increase across the Big Apple in order to force the migration out of New York, which has remained atop Zumper’s top 100 list since August 2022.
The Zumper National Rent Report analyzes rental data from over one million active listings across the country. Listings are then aggregated on a monthly basis to calculate median asking rents for the top 100 cities by population and migration patterns, providing a comprehensive view of the current state of the market. The report is based on all data available in the month of publication. Any data that is reported does not include short term listings. View our full methodology here.