Rent increases are slowly cooling off — but will it continue? Here’s what experts say

David Zalubowski/AP

The red-hot rental market in the U.S. is showing signs of cooling.

Prices are still up from this time last year, but August 2022 was the first time the market experienced a single-digit growth in the past 13 months, according to a report from At the same time, the median asking rate in the country’s 50 largest cities declined to $1,771, down $10 from July’s median.

Other analysts shared similar observations, including CoreLogic, which says it saw single-family rent growth “continue to slow from the historic high recorded in April” in July, according to its Single-Family Rent Index.

Redfin also says it has seen moderating growth, although it, too, noted that asking rent prices continued to climb.

As growth slows, will renters see prices fall, too? Here’s what experts think.

Demand is strong

Since the start of the COVID-19 pandemic in March 2020, the number of renter households in the United States has grown, according to Harvard University’s 2022 “The State of the Nation’s Housing” report.

As this demand has risen, vacancy rates, the number of rentals that are vacant and available to be leased, have decreased, the report says. In other words, there aren’t enough rentals for all the households that want to rent.

Why did demand spike?

Emergency income supports, such as federal cash supports, student loan payment moratoriums, eviction moratoriums and a strong labor market, have likely given young adults enough to afford their own households, mainly by renting, the report says.

The job market and wage growth have held strong enough to give these renters the stability to continue renting, which means continued pressure on supply.

Soaring mortgage rates

Another pressure on rental supply and demand: the booming housing market and sky-high mortgage rates.

As of the week of Sept. 22, the average mortgage rate in the U.S. was 6.29%, up 0.27% from the previous week and up 3.41% since this time last year, according to Freddie Mac’s data.

Rising mortgage rates mean growing demand for rentals.

“When mortgage rates go up, more folks get priced out of the purchase market. They (we) then spend more time in the rental market, gobbling up that supply and pushing prices higher than they would otherwise,” Andrew Justus, a housing policy analyst at the Niskanen Center, a policy group, wrote in a Sept. 16 tweet.

High mortgage rates slow homeownership, according to Justus.

“Families unable to purchase starter homes remain in the rental market. Like a snake swallowing a rat, the glut of renters with no place to go strains the system,” he wrote in a blog post. “But unlike a snake, the supply of rental housing is not highly elastic. Since demand for housing will remain high, rent prices will remain high.”

So although rent prices might be slowing, as long as mortgage rates are high, renters likely won’t see a huge drop in prices anytime soon.

Rising interest rates

There may be some hope, however.

Although prices will remain higher than they have in past years, growth is likely going to continue to slow as the Federal Reserve continues raising interest rates, according to Redfin.

The Fed raised interest rates by 0.75 percentage points following its September meeting, marking the third rate hike this year in its attempt to moderate inflation.

“Higher interest rates impact the rental market because they put a damper on spending power in the economy as a whole, including renters’ budgets,” Redfin Deputy Chief Economist Taylor Marr said.

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