According to real estate marketplace Zillow, rents saw their biggest one-month drop in at least seven years last month.
Zillow’s Observed Rent Index showed that asking rents fell 0.4 percent between October and November, the largest decline in the index’s history. The index has previously found that November tends to be the slowest month for rent increases, but it hasn’t seen a drop of more than 0.1 percent at this time of year since before the COVID-19 pandemic.
The index showed rents fell 0.1 percent in October, and the company said in its analysis that November’s data “decisively” ends nearly two years of above-average monthly rent increases.
The typical asking rent nationally is $2,008, which is 8.4 percent more than this time last year, per Zillow. The company said rents have fallen since reaching a 17.1 percent year-on-year increase in February as housing demand has slowed due to high inflation and rent costs.
“More and more people are doubling down with roommates or family, increasing rent vacancy rates and therefore putting some pressure on landlords to control rent increases,” said Zillow’s analysis.
Rents are falling fastest in Raleigh, NC, Austin, Texas, Seattle, Washington, San Jose, California and New York City, according to the index. In all these cities, rents fell by at least 1 percent in the past month.
During the same period, rents were still rising in cities such as Louisville, Ky., Memphis, Tenn., and Buffalo, NY.
Zillow’s analysis suggests that the slower pace of growth is likely to be reflected in official rental inflation measures next year.
The price drops come as the Federal Reserve has taken steps to control inflation, aiming to keep inflation at 2 percent. The Fed raised interest rates this week by 0.5 percentage points to a range of 4.25 to 4.5 percent, a smaller increase than previous repeated hikes of 0.75 points.
After a series of four aggressive 0.75-point hikes, the Fed appears to be signaling that it will slow hikes as inflation begins to show signs of abating.
Inflation, as measured by the consumer price index, fell from 7.7 percent in October to 7.1 percent in November, well below the peak of 9.1 percent in June, but still far from the target of 2 percent.
Some economists have expressed concern that the Fed’s action could trigger an economic downturn, but the economy has shown resilience over the months, continuing to add jobs and keeping the unemployment rate low.