Rental housing prices not likely to drop significantly

Cost still remains the No. 1 factor for most renters

An ongoing boom in apartment construction has helped slow down rental inflation — but renters shouldn’t expect prices to drop dramatically from their pandemicpadded highs. That means affordability will remain the dominant narrative in rental housing in 2024.

The combination of a pandemic economic rebound, a longtime shortage of rental housing stock and high interest rates on mortgages created a perfect storm for rental prices to spike beginning in 2021 and peaking last spring, inflation data shows. Since then, price growth has steadily declined, which could provide a modicum of relief for renters.

As it stands, rent prices nationally are almost 30% higher than before the pandemic. In January, though, average rents were up only $1 higher than December 2023, and declined in some markets.

Although housing cost trends can vary a lot regionally, a decline in nationwide rental inflation protects most renters from big price hikes the next time they sign a new lease, says Orphe Divounguy, a senior economist at the real estate website Zillow. That’s important because Divounguy says cost still remains the No. 1 factor for renters.

“They care more about staying within budget than they do about anything else,” says Divounguy. “They care less about if it’s an apartment or a house, the number of bedrooms or bathrooms — it’s about the price.”

Although affordability is the prevailing theme this year, Divounguy says he also expects 2024 to be the year of “the big reset” in the housing market — in other words, a period of relatively stable prices for both buying and renting.

“In 2022 we had the interest rate shock. In 2023 we had a big pause because people just didn’t know what to do. And now we’re starting to see a normalization in the housing markets when it comes to prices and rents,” he says.

Inventories of homes for sale remain lower than prepandemic averages, federal data shows. Because of high mortgage rates, many current owners are staying put, which has a ripple effect on the rental market. In the end, there still aren’t enough homes to go around.