{"id":25344,"date":"2023-06-21T05:05:48","date_gmt":"2023-06-21T09:05:48","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/the-power-dynamic-between-landlords-and-tenants-could-change-as-rent-prices-slow-down-in-some-cities\/"},"modified":"2023-06-21T05:05:50","modified_gmt":"2023-06-21T09:05:50","slug":"the-power-dynamic-between-landlords-and-tenants-could-change-as-rent-prices-slow-down-in-some-cities","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=25344","title":{"rendered":"The power dynamic between landlords and tenants could change as rent prices slow down in some cities"},"content":{"rendered":"

Renters may still be feeling the sting of skyrocketing price increases from two years ago, but at least those costs are unlikely to worsen this year, according to data from the real estate website Zillow
\n Z,
\n +2.55%<\/bg-quote>.<\/span>\n <\/p>\n

For about a year, typical rent prices have been slowing down nationwide, and May was no exception, according to the latest Zillow rental data. But lease prices remain above pre-pandemic levels.<\/p>\n

\n

The report, released June 6, shows typical rent prices are now $2,048 \u2014 an increase of 4.8% from one year ago. It marks another month of slowdown in annual growth rates since the peak of 17% in February 2022, according to Zillow.<\/p>\n

Plus<\/strong>: 5 cities where stuff is cheaper<\/p>\n

Jeff Tucker, senior economist at Zillow, says this spring leasing season is close to normal compared with the past three very abnormal years. During that time, the rental market moved from sluggish in 2020 to overheated in 2021 before beginning to cool in 2022, he says.<\/p>\n

\u201cIt\u2019s been several months in a row of slightly below or below normal monthly rent growth for the nation as a whole,\u201d he says.<\/p>\n

As rent growth continues to slow, the power dynamic between landlords and tenants could shift, Tucker says. \u201cVacancy rates are likely rising, and landlords are feeling a little bit more pressure to lease up their units and feeling a bit of that bargaining power shifting slightly in favor of the tenants themselves,\u201d he says. \u201cUnfortunately for renters, that does not mean rents are plummeting back down to earth \u2014 right down to pre-pandemic levels.\u201d<\/p>\n

<\/p>\n
\n Ready to rent your first apartment? Here\u2019s how to be a competitive tenant in this rental market and get your first lease signed.
\n <\/figcaption><\/figure>\n<\/p><\/div>\n

Last month\u2019s consumer price index (CPI) showed that shelter \u2014 including rent \u2014 was the dominant contributing factor to inflation. But there\u2019s a lag in how rental data is reflected in the CPI because of the cycle of new leases. New rental leases typically last a year, which means the rental data included in that report reflects last year\u2019s rental prices, not this year\u2019s.<\/p>\n

And about a year ago, rent prices started slowing down, Tucker says. Last month, Tucker said he\u2019d hoped to see the rent price slowdown of spring 2022 start to be reflected in the CPI, which didn\u2019t happen. But it will show up eventually, he says. So it\u2019s possible that the next CPI report \u2014 to be released Tuesday by the Bureau of Labor Statistics (BLS) \u2014 will start to show last year\u2019s spring decline in price growth.<\/p>\n

In the meantime, Tucker says, based on Zillow\u2019s data, typical rents for the rest of 2023 should continue to slow down.<\/p>\n

\u201cIf I\u2019d bet money on it, I would expect that we continue to see subdued, sort of lower-than-average rent growth in the remaining months of this year,\u201d he says.<\/p>\n

Also see:<\/strong> Investors are building a record number of homes \u2014 solely to rent out. Will this hurt aspiring homeowners?<\/p>\n

What makes rent unaffordable?<\/strong><\/h2>\n

Recent rental data from Zillow may show a downward trend in price growth, but an analysis of rent data shows it\u2019s still unaffordable to lease in most cities in America.<\/p>\n

The meaning of unaffordable may vary by household, but the general guideline is you should spend\u00a0no more than 30%\u00a0of your gross income on rent. Among the most unaffordable cities, median income earners in six places would be considered \u201cseverely rent burdened\u201d by federal standards.<\/p>\n

A monthly NerdWallet rent-to-income ratio analysis of 227 cities in the U.S. finds that, based on the most recent data for April, nearly 67% of rents on the market were equal to or above the recommended 30% ratio in March. The\u00a0previous month\u2019s report\u00a0shows the ratio in April was 67% compared with 65% in February and March.<\/p>\n

That means if you live in one of the cities where the rent-to-income ratio is 30% or higher and you earn the median income or less, the typical rent in your area is likely moderately to severely burdensome. Market rent comes from Zillow, based on May data, and\u00a0median household income\u00a0used for this analysis is from 2021 U.S. Census Bureau data. The data doesn\u2019t differentiate between incomes for residents who own rather than rent in those cities.<\/p>\n

By federal standards, spending 30% to 49% of income on rent means a household is \u201cmoderately rent burdened,\u201d and spending 50% or more means a household is \u201cseverely rent burdened,\u201d according to the NYU Furman Center, which conducts research about housing and urban policy.<\/p>\n

Among the 227 cities analyzed, nine have rent-to-income ratios that put renters with median incomes in the \u201cseverely rent burdened\u201d category for May:<\/p>\n