The median U.S. asking rental price saw an annual 0.8% increase in May to $1,653, marking the highest level since October 2022, sustaining an upward trend driven by robust demand and constrained supply.
This is the second consecutive month of rent increases following nearly a year of declines, highlighting the ongoing affordability challenges renters face nationwide, according to Redfin data.
The recent uptick in the median asking rent, which now stands just $47 below the record high, saw significant increases in Washington, D.C., Cincinnati, and Chicago, all of which experienced double-digit growth.
On Tuesday, the iShares Residential and Multisector Real Estate ETF (NYSE:REZ) declined by 0.9%, while the Tidal ETF Trust Residential REIT ETF (NYSE:HAUS) edged down by 0.1%.
Young Renters Demand Remains Strong, Backlog Of New Units Temper Increases
"Demand from young renters remains high, as many of them are opting to stay put rather than contend with an increasingly unaffordable homebuying market," said Redfin senior economist Sheharyar Bokhari.
"But so far, rent price growth has been limited because there are enough new apartments to meet demand, even in the busiest time of year for the rental market."
Despite a recent decline in multifamily building starts below their 10-year historical average, a backlog of new units continues to hit the market each month, tempering rent price growth.
Regional Rent Trends
Washington, D.C. saw the highest annual increase in median asking rent in May, jumping 11.1%, the largest rise among the 33 major U.S. metropolitan areas examined by Redfin. Other notable increases were recorded in Cincinnati (10.9%), Chicago (10.8%), Virginia Beach (10.3%), and Minneapolis (10.3%).
On the flip side, significant rent declines were observed in Jacksonville (-10.1%), San Diego (-8.7%), Austin (-7.2%), Seattle (-5.9%), and Phoenix (-5.5%).
According to Redfin analysis, the Sun Belt's rent reductions are partly due to the region's aggressive apartment construction to accommodate the influx of new residents during the pandemic. As the housing boom wanes, these areas are experiencing higher vacancies, which is driving rents down.
Meanwhile, many cities in the Midwest are seeing rent increases as fewer new apartments are being built. The Midwest's relative affordability continues to attract renters, boosting demand despite the national housing affordability crisis.
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Image generated using artificial intelligence via Midjourney.