Potential first-time homebuyers — already facing a myriad of obstacles over the last two years — are getting hit again from rising mortgage rates, making renting a more attractive option than ever for millions of Americans. And landlords are raising rates accordingly.
The Consumer Price Index released on Friday was up 8.6% year over year, with the shelter index rising 0.6% in May, the largest monthly increase since March 2004. The rent index rose 0.6% over the month, the same increase as in April, and the owners’ equivalent rent index also rose 0.6%.
That tracks with Redfin’s report last week that showed the median monthly asking rent in the U.S. surpassed $2,000 for the first time in May, rising 15% year over year. “More people are opting to live alone, and rising mortgage-interest rates are forcing would-be homebuyers to keep renting,” said Redfin deputy chief economist Taylor Marr.
“These are among the demand-side pressures keeping rents sky-high. While renting has become more expensive, it is now more attractive than buying for many Americans this year as mortgage payments have surpassed rents on many homes. Although we expect rent-price growth to continue to slow in the coming months, it will likely remain high, causing ongoing affordability issues for renters.”
Rents in the nation’s hottest markets continue to outperform, with Austin leading the list. That makes sense when you look at how high home prices have risen in the Texas capital, where median home prices soared 30% over the last year due to increased demand.
Redfin’s list of Top 10 metro areas with the fastest rising rents:
- Austin, TX (48%)
- Nashville, TN (32%)
- Seattle, WA (32%)
- Cincinnati, OH (32%)
- Miami, FL (29%)
- Fort Lauderdale, FL (29%)
- West Palm Beach, FL (29%)
- New York, NY (24%)
- Nassau County, NY (24%)
- New Brunswick, NJ (24%)
Where is rent declining? Redfin notes that just three of the 50 most populous metros saw decreases, with Milwaukee leading the way at -10%, followed by Kansas City, Missouri, and Minneapolis, both at -3%.