The Reality of Rental Prices: Why They’re So High and When They’ll Go Down

Rents are expensive right now, there is no question about that. In certain markets, prices are nearing all-time highs. Rent increases are placing a significant strain on the monthly budgets of a significant number of Bellingham renters. It makes sense that listed rents are rising given that they have increased by 15% nationally and up to 30% in some cities. Additionally, as many buyers are priced out of the housing market by inflation and rising interest rates, there is a growing pressure to rent. So what’s driving this trend, then? And when will the rent start to decrease again? Here is a peek at the current state of rental prices and why experts believe they may soon begin to decline.

Why is Rent So High?

Several factors are currently driving up rental costs. The pace of new construction is slow, the residential real estate market is fiercely competitive, there are fewer rentals available, and the effects of the eviction moratorium from the pandemic are still being felt. Let us assess each factor more closely.

Slow Pace of New Construction. The market for single-family homes has been flourishing for a number of years, but this growth has not translated into the construction of a large number of new apartment buildings. Because building single-family homes or high-end apartments is much more lucrative for developers than building more affordable units, this is the case. As a direct consequence, the rental market has been tight for years due to an insufficient supply of new units to meet demand.

High Home Prices. The condition of the home-buying market also contributes to rising rental costs. In many markets, prices have reached record highs after years of stable growth. The cost of purchasing a home has been getting more expensive due to rising mortgage rates. As a result, more people are compelled to rent rather than buy, further increasing prices.

Fewer Available Rentals. Fewer rentals are now available on the market as a result of the high demand and low supply. Based on a recent report by Apartment List, the amount of available rental units nationwide has decreased by 20% since 2019. In some markets, the available units have decreased even further.

The Eviction Moratorium. The eviction moratorium is the last factor influencing rental costs. The moratorium enacted last year to secure tenants during the pandemic has proven to be challenging for Bellingham property managers to evict non-paying tenants. As a result, numerous landlords are nervous to rent to new tenants out of fear that they will be unable to recoup their losses if the tenant fails to pay.

When Will Rent Start to Go Down?

You may be wondering when rental prices will begin to decline now that we’ve discussed the factors increasing rental prices. Unfortunately, it is tough to tell for certain. However, there are indications that the rental market may soon begin to cool. One sign of a slowdown is in single-family home sales. This could result in more people staying in their current homes rather than moving, thereby reducing the demand for rental housing.

New apartment construction is an additional indicator that rents may begin to decrease. This has been influenced in part by changes to the tax code that increase the profitability of renting out properties. As a result, even though it may take a few years for these new units to become operational, they should help mitigate the rental market’s tight supply and keep inflation in check.

If you are feeling the pressure of high rents, there is hope that relief may be on the horizon. However, in the interim, budget carefully and search for deals to make ends meet.

If you are looking for a better rental situation, contact Real Property Management Teyata. We may be able to help you find a quality rental home you can afford. You can view our listings online.