Rents across the country rose by an average of 7.8 percent in September, up a substantial 25% since before the Covid-19 pandemic. Renters are feeling the pressure as wages have failed to keep pace with the rising cost of rent, despite the rental market showing signs of a month-on-month slowdown.
Cincinnati, Ohio, saw the most significant rise in rent costs at an increase of 26 percent. At the same time, in Milwaukee, Wisconsin, renters paid an average of 15 percent less in rent over the past month. Portland, Indianapolis, Pittsburgh, and Nashville are a handful of places in the U.S. where rent prices are the highest. Along with Milwaukee, Baltimore, Minneapolis, and Jacksonville are other cities where rent prices are cooling off instead of increasing.
According to Bloomberg, data reveals that median rents across the country peaked in July, with the median national asking rate rising to $2,032 in July, an increase of 14 percent over the previous year.
“Wages haven’t kept up with that. Renters are really feeling squeezed,” said Ryan Coon, vice president of rentals for Realtor.com. Coon noted that even though there is an increase in new apartments coming on the market for potential buyers, “Renters are staying put; they’re less mobile.”
Soaring rents coincide with the average interest rate on home loans across the U.S. hitting its highest level since 2006. Meanwhile, the Federal Reserve has continued to hike rates to fight inflation, raising borrowing costs for homebuyers. Rising rents have contributed to and are a significant driver of inflation.
Recent data shows rents soaring in cities across the U.S.
In the most recent data from Redfin, rents in Cincinnati rose by 26 percent in August, the fastest in the U.S. Meanwhile, Pittsburgh was second, with rents increasing 22 percent. Indianapolis was third with 21 percent, followed by Nashville at 20 percent and Portland in fifth with a 19 percent hike.
The average rate for a 30-year fixed rate mortgage for the week of October 7 hit 6.81 percent, marking a weekly increase for the eighth straight week, according to the Mortgage Bankers Association (MBA).
Home sales volume has plunged with higher borrowing costs. The MBA’s Purchase Index has dropped 39 percent from a year ago and 2 percent from the prior week. The index measures new mortgagees to buy a home.
Since the beginning of the year, mortgage rates have more than doubled as the Fed continues to follow an aggressive path of interest rate hikes to bring down increasingly-stubborn high inflation. The actions by the Fed are designed to cool down the economy but have weighed heavily on the housing sector as it is interest-rate-sensitive.
The MBA’s Market Composite compiled mortgage loan application volume fell 2 percent from the previous week and down around 69 percent from last year. The MBA’s Refinance Index also declined over the past week by 1.8 percent. The index is down 86 percent from a year ago, as higher interest rates have smothered the demand for mortgage refinancing.
“Application volumes for both refinancing and home purchases declined and continue to fall further behind last year’s record levels,” said Mike Fratantoni, Chief Economist and MBA’s Senior Vice President. “The news that job growth and wage growth continued in September is positive for the housing market, as higher incomes support housing demand,” he added.
“However, it also pushed off the possibility of any near-term pivot from the Federal Reserve on its plans for additional rate hikes,” Frantantoni said.
