Rental costs continued to be one of the priciest things Americans pay for in March, but there are signs some relief may be in sight.
The cost of rent was 3.9% higher than a year ago for the third straight month, the Labor Department said Friday. That’s among the highest monthly readings since just as the Great Recession was getting started in late 2007, though it’s down a touch from 4.0% at the end of last year.
The annual growth in rental costs has outpaced annual inflation by more than a full percentage point for 34 months in a row, the longest such streak since the early 1950s.
But that may soon ease. “We think the recent slowdown is more than just noise,” Goldman Sachs economists wrote earlier this week. “We believe the lagged impact of elevated multifamily construction activity in the last two years is exerting upward pressures on vacancy rates and downward pressure on prices.”
Multi-family, or apartment, construction, has been on a tear since the housing bust as builders tried to satisfy demand for housing to be rented rather than owned. In the five years since the recession ended, multi-family housing starts have run at a pace nearly 30% higher than they did throughout the 1990s.
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Now that’s starting to bear fruit, particularly in the higher-end areas of the market. According to Zillow data from February, rents were down 9% in Chicago, 5% in San Francisco, and 3% in Miami. They were up the most in some of the less high-end markets: 25% in Merced, California, 17% in Reno, Nevada, and 14% in Kingston, New York.
City Average rent, February 2017 Change from February 2016, $ Change from February 2016, % Bend, Oregon $1295 $282.50 28% Merced, California $750 $151 25% Wichita, Kansas $725 $130 22% Salisbury, Maryland $1,175 $200 21% Las Vegas, Nevada $1,150 $181 19% Chicago, Illinois $1,500 -$150 -9% San Francisco, California $2,852 -$148 -5% Miami, Florida $1,795 -$55 -3% San Jose, California $2,740 -$50 -2% New York, New York $2,375 -$25 -1%
Another, less-discussed reason for national rents to be nudging down: massive declines in the oil patch.
City Average rent, February 2017 Change from February 2016, $ Change from February 2016, % Midland, Texas $900 -$295 -25% Casper, Wyoming $750 -$235 -24% Cheyenne, Wyoming $760 -$135 -15% Odessa, Texas $852 -$143 -14% Helena, Montana $750 -$85 -10%
While such broad national strokes may mean little to renters in areas where costs aren’t falling so rapidly, the Goldman economists believe the overall supply picture will continue to push rents down for some time, dropping to about 3% on an annual basis by early next year. That may make things easier for renters across the country.
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