Will Rent Prices Go Down in 2023?
Experts say there are reasons to be optimistic.
It’s no secret that we’re in the midst of a housing crisis in America. According to the Joint Center of Housing Studies at Harvard University, over 12% of households in 44 U.S. states struggled to pay rent in early 2021. In some states—such as Mississippi, Delaware, Louisiana, Alabama and Georgia—the number reached over 20%.
Causes for incommensurate rent in relation to income include inflation, a chronic shortage of affordable housing, a slowdown in renter household growth, an increase in unemployment due to the pandemic and systemic racism in the housing and job markets with Black Americans at a particular disadvantage. Taken together, these concurrent and interdependent issues have resulted in millions of Americans unable to afford their rent or otherwise “rent-burdened,” meaning that more than 35% of their income goes to rent.
It’s no wonder that many of us are scouring the internet for good news about our rent prices. And surprisingly, there are several reasons to be optimistic. To get a clearer picture of what renters can expect, we spoke to Taylor Marr, Deputy Chief Economist at Redfin, and Bob Pinnegar, CAE at the National Apartments Association. Here’s what they had to say.
What to expect from rent prices in 2023
Top economists project that in 2023, rents will actually be cheaper than we’ve seen in the past few years. According to Marr, national rent prices “peaked in early 2022 and have been on a downward trajectory ever since.” The average national rent for an apartment dropped below $2,000 per month in December 2022, and Marr has already seen rent prices fall in 14 out of 50 metropolitan areas. This sets the stage for a particularly favorable market for renters, especially those who are considering moving or renewing a lease.
Of course, rental prices and markets vary greatly by geographic region. Marr explains that some “Boomtowns” such as Raleigh, Nashville, and Charlotte will continue to experience price gains as demand for housing continues to rise. Additionally, as smaller Midwestern cities accommodate the “Boomerang generation”—millennials who moved to the coasts to start their careers, then returned to the states they came from—we are still seeing rent prices in Indianapolis and Cleveland rise between 14% and 16%.
However, in larger cities like Minneapolis and Chicago, rent prices are dropping (9% and 4%, respectively year-over-year as of December 2022). These drops can be partially attributed to greater housing supply due to local zoning laws and other policy changes. Pinnegar also emphasized the positive effects of increasing the supply of affordable housing, stating that “fluctuations in rent prices ultimately trace back to supply and demand” and “many economic forecasts hope that this year will see decades-high apartment completions, which could help make tangible progress in remedying our country’s housing supply/demand imbalance.”
While it is impossible to generalize rental prices for all regions, Marr states that many Americans can expect to see rent prices drop by a few percent nationally in 2023.
Incentives versus price decreases
Now, the form these price decreases take will also vary. Marr explained that while it’s unusual to ever see landlords drop prices directly during lease renewals, individuals who are starting new leases may see price decreases. “Rises in vacancy rates are tracked by multiple companies, including [Redfin], and that puts pressure on landlords to lower rents and fill units,” said Marr.
Additionally, if rent prices are kept the same, renters may still see a rise in offered incentives, such as a free month’s rent or included parking. This is because these concessions are much less costly for landlords than maintaining vacant units.
How to score rent deals in 2023
Natee Meepian/Getty Images
So, how can renters best leverage their bargaining power in this more favorable market? Here is the advice Marr offers to clients, friends and family:
- Take advantage of seasonal trends: Rental prices are highest during peak moving season—May through August—and lowest during the winter. If possible, try to move during that time to score a monthly rent discount of $100 to $200. If you’re worried about breaking your lease, don’t be. Marr says you can typically negotiate an early rent release. Talk to your landlord 30 to 60 days before you’d like to move out and explain your rationale. If they are concerned, offer to help list the unit, take good photos of it, and try to find a replacement tenant or subletter.
- Negotiate! Though it may seem intimidating, now is the opportune time to negotiate additional benefits with your landlord. As Marr points out, “the worst thing they can do is say no.”
- Keep an eye on your local market: The best way to enter a rent negotiation is armed with accurate and applicable information. Marr suggests turning to Rent.com, finding your city and clicking “Market Trends” at the top to identify specific data you can use before signing.
Hope on the horizon
When I asked Marr what he wanted readers to know about the housing market, he cited an important statistic: 8 out of 10 Americans live within 100 miles of where they grew up. While this is undoubtedly partly due to issues of affordability, Marr also explained that it’s easy to believe misconceptions about how expensive it might be to move into a neighborhood that offers greater chances of economic mobility, especially through better-performing schools. According to Marr, good real estate deals can exist within those neighborhoods too, and readers should “take where they live with intention, rather than defaulting to where they were born or the first apartment they moved into.”
He also emphasized that the housing situation is “changing faster than ever, from week to week.” With this in mind, he encouraged readers not to “close out [their] options.” While in 2021, it was more financially advantageous to own a house, in 2022, rising mortgage rates and interests tipped the scales in favor of renting. Now, experts are starting to see mortgage rates fall, offering a unique opportunity for first-time home buyers.
Above all, if it is financially possible for you, try to speak with a lender or real estate agent to get a sense of what options might be best for your personal situation. Additionally, stay as informed as possible, so that you are prepared to make advantageous economic decisions when the opportunities arise. Here’s to a prosperous 2023!
- Joint Center of Housing Studies at Harvard University: The State of the Nation’s Housing
- Joint Center of Housing Studies at Harvard University: Renters’ Responses to Financial Stress During the Pandemic
- The Housing Initiative at Penn: The Need for Rental Assistance in Los Angeles City and County