Rent prices have risen over the past year across the U.S., but there are some bright spots: Several cities experienced modest price drops thanks to new building projects.
Although rental rates went up nationwide, the increase was actually fairly modest at about 1.5 percent, according to a new report from rental site Apartment List. That's down from a high of 3.6 percent in 2015, the report found. The increase was so minimal that it actually lagged the Bureau of Labor Statistics reported wage growth (2.7 percent) and overall inflation (2.5 percent).
Others that track the real estate market have also noted the slowing of rent prices. Apartment management software and data provider RealPage estimated in March that year-over-year growth was down to 2.3 percent, falling from a 2015 rate of 4.7 percent.
"It's definitely great news for renters, many of whom are still struggling with affordability," Chris Salviati, a housing economist at Apartment List and lead researcher on the report, tells CNBC Make It.
To calculate rent growth rates, Apartment List looked at year-over-year changes using rent data collected from Census information through the American Community Survey that included properties ranging from large multifamily buildings to single-family homes. The site then extrapolated those rent estimates forward using price change data from the millions of properties listed on ApartmentList.com.
Of the 25 biggest cities in the U.S., Apartment List found seven — Baltimore, Chicago, Pittsburgh, Portland, Seattle, St. Louis and Washington, D.C. — where median rental rates actually decreased year over year.
The price drops in Portland, Oregon, and Seattle are due, in large part, to the flood of new apartments hitting the market, Salviati says. Overall, Portland saw a 2.2 percent decrease, while Seattle rental prices dropped 0.9 percent.
"Over the past year, they've had a record number of units hit the market," Salviati says. This trend especially helped Seattle, which previously had the country's fastest rising rent prices in 2017, with over 5 percent increases every year since 2015.
However, that's not to say either city's rentals are cheap — especially since much of the new construction is luxury apartments, rather than affordable housing. The average 1-bedroom apartment in Seattle costs just over $1,300 a month, while a 1-bedroom in Portland goes for $1,128, according to Apartment List. Currently the national average for a 1-bedroom apartment is $946 per month, up from $852 in June 2014, Apartment List's data shows.
"It's going to be a struggle to be able to find a place they can live in these markets for the foreseeable future," Salviati says. Those steep rent prices extend to tech hubs like San Francisco and coastal metros like New York City — and are pushing up rent in other parts of the country as Americans look outside these hubs for more affordable places to live.
"Atlanta and Phoenix are both cities that have been growing a lot over recent years," Salviati says, noting that rents in these cities increased modestly because of the influx.
It's unlikely that rental costs will decline dramatically next year, Salviati says. In fact, the multi-family housing phase is leveling off — and having that new supply of apartments come online is one of the biggest factors that suppresses rent. "If that slows down a bit, I think rents could go back up quickly," Salviati adds.
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