Rental housing rates have set another record high for the 17th straight month, with the median monthly rent in the 50 largest metropolitan areas jumping to $1,879 in July.
This is up 12.3 percent from 2021 based on data from Realtor.com and across listings for studios, one-bedroom and two-bedroom dwellings. Meaning, larger apartments and houses are excluded from the median rate.
Rents are soaring at a double-digit pace, but the rate of increase has cooled down from the peak surge of 17.3 percent in January.
Realtor.com chief economist Danielle Hale said landlords have eased up on rent increases, but many still feel the burden on their monthly budgets. "Even as they juggled higher costs for food and groceries and transportation, rising rent and housing expenses is the biggest source of financial strain," she said.
The U.S. inflation rate climbed 8.5 percent in July after jumping to a 40-year high of 9.1 in June. With the central bank pushing interest rates higher to cool inflation, mortgage rates are taking a hit as they climbed to the highest level since November 2008, making it more difficult for renters to buy homes.
Home sales decreased by 29.6 percent in July. However, despite demand slowing, the average price of a newly built home rose to $546,800, or up 23 percent from the previous year.
Hale said many renters are simply tapped out. Due to soaring inflation, higher gas prices and falling stock and cryptocurrency markets, people have less cash on hand to spend on housing.
Miami has the highest July rent increase at 26.2 percent, while the New York area rose by 25.4 percent.
Realtor.com also said there had been bidding wars for apartments and long lines for open houses in New York, where rents rose by 28.3 percent in July, roughly triple the rate of increase in the surrounding suburbs. Other areas with increases exceeding 20 percent were Boston, Chicago and Orlando.
Recipe for homelessness: soaring rental rates, record-high housing prices
Soaring rent prices used to be a big city problem, but that is no longer the case. The skyrocketing rental rates coming at the same time when housing prices are at historic highs make it more and more difficult for people to afford to live, which could lead to a higher risk for homelessness, especially for people at the lower end of the income spectrum.
The asking rents in the second quarter were 23 percent higher nationwide compared to the same period in 2019.
On a macro level, high rent increases also contribute to inflation, causing the federal bank to raise rates and put a stop to the economy – putting it closer to the possibility of a recession, which won't bring relief for renters. (Related: Higher interest rates, inflation weigh down housing market.)
If the economy slows down, rents will not fall and people are more likely to lose their jobs. Moreover, rent prices are recession-proof because people are less likely to buy homes when the economy is not doing well.
Soaring rent means that landlords are passing on their rising costs to renters. They are basically capitalizing on the strong demand for housing, especially in places where people have migrated because of remote work.
Moreover, people now want more space and some will pay for more square footage. (Related: Obama health care reform imposes 3.8% tax on all income from home sales and home rental income.)
This demand pushes up rental prices for everyone because once the landlords realize they can charge more for a unit, they're going to keep increasing the rental price to get as much profit as they can.
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