Calculated risk Lawler: Are rents falling in the US?

by calculated risks 11/15/2022 09:42:00 AM

Today, in Calculating Real Estate Newsletter: Lawler: Are Rents Falling in the US?

Brief excerpt:

After increasing at an unprecedented pace in US history from the spring of 2021 to the middle of 2022, it appears that rental growth in the US has slowed sharply over the past few months. In fact, most of the “high-frequency” (i.e., most favorable) data suggests that US rents may have stopped increasing this fall, and may have already begun to decline.

Below is a table showing the monthly percentage changes in these rent indexes that are not adjusted for seasonal fluctuations.

CR note: CoreLogic was negative in September (released this morning).

Note that the Apartment Listing Index, which was not smoothed, showed two consecutive monthly declines, while the Zillow Index, which was smoothed, fell due to [first] time over two years in the past month. Also note that the CoreLogic benchmark, which is only available during August and has been smoothed, slowed sharply during August.

The above table can be a bit misleading, because all three rental indices display relatively modest but statistically significant seasonal fluctuations…

While none of these rent indexes is perfect, The latest data indicates that rental growth in the United States has slowed sharply in recent monthsand at best it was growing in the low and single digits It’s very likely that it actually turned slightly negative last month. If that’s the case, that’s certainly not surprising, and as I mentioned in a previous report, I expect rents in the US in 2023 to be lower than rents during the summer and fall.

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