Rents are rising sharply year on year, and the pace is slowing down

by Calculated risk on 7/29/2022 12:35:00 PM

Today, in the calculated risk real estate bulletin: rents increase sharply year on year, the pace of rent continues to slow

Brief excerpt:

Below is a graph of the annual change (on an annual basis) for these measures since January 2015. All these measures up to June 2022 (list of apartments up to July 2022).

Note that new rental measures (Zillow, apartment listing) fell early in the pandemic, while BLS measures were consistent. Then new leases took off, and BLS actions began to pick up.

The Zillow gauge rose 14.8% year over year in June, down from 16.0% year over year in May. This is down from a peak of 17.2% year over year in February.

The ApartmentList metric is up 12.4% year over year as of July, down from 14.1% in June. This is down from a peak of 18.0% year over year last December.

Obviously rents are still on the rise, and we should expect this to continue to spill over into inflation metrics in 2022. Owners’ equivalent rent rose 5.5% y/y in June from 5.1% y/y in May – and is likely to rise further in the months coming.

I doubt rent increases will slow over the coming months as the pace of household formation slows and more supply comes into the market.

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