What's the Scoop on Rental Prices?

 

Rental Prices Continue To Tick Up, but the Wild Increases  Appear To Be Over  By Clare Trapasso  Realtor.com Feb 23, 2023 As the new year kicked off, the wild run-ups in rental prices                                            that terrorized tenants last year appear to have leveled off. January was the 12th month in row where rent growth slowed,                                according to the Realtor.com® monthly rental report. Monthly                                        rents were down $ 80 from the peak in August, but they were still                              up 2.9% year over year, to hit a median $ 1,726 a month in the                            nation’s 50 largest metropolitan areas. (Realtor.com looked at rents for studios, 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 biggest takeaway is while the rental growth is slowing,                                   the affordability concerns continue,” says Realtor.com                                           Senior Economist Jiayi Xu. Tenants have been grappling with sticker shock as rental prices                              soared during the COVID-19 pandemic. Many couples and individuals                          moved out on their own, while others were would-be homeowners who were trapped in rentals after being outbid or priced out of the for-sale housing market.                      This strained the limited supply of rentals, driving prices upward. Rents were the lowest in Oklahoma City, the only one of the 50 largest                      metros where tenants can still find a home for just under $ 1,000 a                            month. Median rents in the metro were $ 982. Louisville, KY,                          and Birmingham, AL, rounded out the top three most affordable                            metros with median rents of $ 1,167 and $ 1,178 respectively. But renters in those lower-priced parts of the country shouldn’t                                    get too comfortable. Prices rose the most in the cheaper Midwest                            and South metros, going up 10.5% year over year in Indianapolis, 8.8% in Birmingham, and 8.3% in Columbus, OH. Meanwhile, rents dropped the most in some of the hottest real                                      estate markets during the pandemic. Monthly rents went down                              6.2% in Las Vegas, 3.8% in New Orleans, 3.6%                                                  in Sacramento, CA, 3.4% in Phoenix, and 1.4% in Austin, TX. “With high rents across the country, places that offer relative                                  affordability tend to be in high demand, which means more                                          competition and that these lower prices might not last                                                  ” Realtor.com Chief Economist Danielle Hale said in a statement.                            “Many of these metros have fewer available rental homes                                        than [in] previous months, and fewer apartments to choose from                            means prices are likely to go up.” Rents also jumped the most for studios, typically the smallest units.                              They rose 3.9% year over year in January, to a median of $ 1,417 .                            For one-bedroom apartments, rents increased 2.8% to $ 1,609,                                for two-bedroom units, rents ticked up 2.5% to $ 1,934 a month. Prices might wind up rising in some of the nation’s priciest metros                                as companies order workers back to their offices. That could mean prices jump in places like Silicon Valley’s San Jose, CA, and San Francisco. The median rents in the cities were $ 3,005 and $ 2,809 a month respectively. “People may move from suburban or cheaper metros to tech hubs because of return to office mandates,” says Xu. “It will boost rental demand once more and increase rental prices.”

Americans Woefully Misinformed About Nation's Housing Market

Daniel DeVise   The Hill  January 23, 2023

A new survey finds Americans are woefully misinformed about the nation’s mercurial housing market, even as millions of them prepare to buy homes.  

Twenty-eight million Americans plan to purchase a home in 2023, according to a survey released Tuesday by NerdWallet, the personal finance company. On average, they hope to spend $269,200. 

But that figure falls more than $100,000 short of the median home price, which was $388,100 in December, according to the real estate brokerage Redfin. Home prices crossed the $269,000 threshold sometime in 2013, Federal Reserve statistics show. 

If prospective homebuyers sound oddly optimistic about prices, that may be because they are pessimistic about the state of the housing market. Two-thirds of Americans surveyed said they expect an imminent crash. 

Real estate economists do not. Lawrence Yun, chief economist for the National Association of Realtors, forecast an average sale price of $385,800 this year, about the same as last year. Redfin predicts a 4 percent drop: bad news for sellers, but hardly a crash.   

“Home prices already have been falling, especially on the West Coast, and prices will fall in some cities in 2023,” said Holden Lewis, a home and mortgages expert for NerdWallet. “But a drop in home prices isn’t necessarily a crash.”  

Another head-scratcher: 61 percent of Americans told pollsters current mortgage rates are unprecedented, meaning that they have never been seen before.  

“We actually defined it,” said Elizabeth Renter, data analyst for NerdWallet. 

The average rate for a 30-year fixed mortgage hit 6.15 percent last week, according to the Fed. That’s higher than most mortgage rates of the past few years, which have ranged below 3 percent at times.  

But it is not unprecedented. Over the last 50 years, NerdWallet reports, 30-year mortgage rates have averaged 7.75 percent. Mortgage rates in the 6 to 7 percent range were common as recently as 2008.  

Homebuyers have basked in a climate of historically low rates for more than a decade. The Fed cut rates dramatically in the Great Recession of 2008 to stimulate the economy, a campaign that continued, on and off, through the COVID-19 pandemic.  

Runaway inflation prompted a dramatic series of hikes in 2022, which pushed mortgage rates back to “normal” levels, at least in a historical sense. 

The new survey of 2,051 American adults, conducted by the Harris Poll for NerdWallet, is the latest iteration of an annual poll. Pollsters have found overconfident home shoppers for several consecutive years.  

“We know from the past five years, roughly 10 percent of Americans say they’re going to purchase a home in the next 12 months, which is wildly optimistic,” Renter said. “Part of it could be that they’re unaware of what’s going on in the housing market.

The survey found more realism when asking respondents how their homebuying plans had panned out in 2022.   

Seventy percent of Americans who had planned to buy a home in 2022 did not succeed. Some of them made offers that were not accepted. Others shelved their plans because they couldn’t find affordable homes.