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Britney Nguyen,Madison Hoff | Contributed
• Demands for rental units are declining as housing costs soar with the price of essentials like food.
• The average renter in the US would have to work over 64 hours to afford rent, Zillow data shows.
• Phoenix, Orlando, and Las Vegas are among the metropolitan areas where demand is slowing the most.
The typical US worker would’ve had to put in over 64 hours of work to be able to afford the average rent payment in September.
That’s an increase of a full 8-hour work day compared to the same time two years ago, when workers had to put in around 56 hours to be able to afford rent, data from Zillow shows.
The beginning of 2022 saw rent prices peak at almost 18% year-over-year growth, but now year-over-year growth is at 7.5% , according to Apartment List. Current rising inflation is adding more pressure to renters now, who have to deal with rising rent each year , and who Bloomberg said are “more likely to have less stable jobs and incomes.”
“Rents have grown much faster than incomes, putting the squeeze on renters’ budgets,” Jeff Tucker, senior economist at Zillow, told Insider.
The data, which starts in 2015, shows that the hours needed to work to afford average rent in the US have fluctuated since then, and dipped the most during the beginning of the pandemic. Since the start of 2021, it’s mostly been on an incline.
Demand for rental units is slowing down as people have a harder time balancing soaring rents and the price of essentials like food and gas, with wages that are not keeping up with rising inflation.
“Rents have had a historic run-up, way beyond what fundamentals would justify,” Susan Wachter, a real estate professor at the University of Pennsylvania’s Wharton School, told Bloomberg . “The Fed will not ease up until inflation abates, which requires rents to slow, the sooner the better and the harder the better, for quick relief.”
In metropolitan areas like Phoenix, Orlando, and Las Vegas, demand for rental units is slowing down the most , according to rental-data tracker RealPage.
This summer, the rental vacancy rate leached 40-year lows, and it may stay low in the near future, Tucker said.
“It’s possible more renters than usual will opt to renew where they are to avoid moving costs while so few other options are available, or maybe even double up with roommates to reduce costs,” Tucker said.
Other reasons for slowing demand include more younger people choosing to live at home compared to earlier during the coronavirus pandemic when housing demand was higher because people were moving out or choosing to move somewhere else due to remote work.
The good news, Tucker said, is that rent growth is “cooling off,” and there are more rental homes that will be available. Twice as many multifamily homes are being built right now than during the last peak in 2008, he added.
“Still, it may be several months before we see these units help raise vacancy rates and further east pressure in the rental market,” Tucker said.
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