Beekin Inc., a developer of next-generation AI platforms for rental housing investors and lenders, has released its Year-End Rental Analysis for 2023, with data pointing toward improved conditions for renters.
The rate of annual rental price increases for single-family rental properties and multifamily rental units continued to trail rises in median home prices, the Consumer Price Index (CPI) and wage growth in 2023. The Beekin study, prepared by market intelligence firm CJ Patrick Company, shows that while the CPI rose 4.1% in 2023, rents for multifamily units and single-family rental properties rose by just 1.1% and 0.4%, respectively.
Where rental prices are on the rise
Increases in rental prices on single-family properties exceeded the growth of the median sales price of homes in just 13 states, while home price increases were higher than rental price increases in 37 states and the District of Columbia. Rent price increases on multi-family units were lower than home price increases in 29 of the 47 states with enough data available to report on.
“In most of the country, rental affordability continues to improve relative to home prices, which are rising more rapidly,” said Beekin Founder and CEO Vidur Gupta. “Wage growth rose 4.5%, outpacing the rate at which rental prices are increasing, while median home prices went up 2.1%. This is all great news for prospective renters.”
Breaking down the numbers
Beekin and CJ Patrick Company used data on more than 12 million unique single-family homes and multifamily units dating back to 2015. Methods like those used by the Bureau of Labor Statistics (BLS) for the Consumer Price Index helped to extrapolate rent growth at the national, state, and local level for more than 170 metropolitan statistical areas (MSAs). The team sourced wage data from the BLS report on average hourly earnings of non-farm employees. State and MSA-level data is available upon request.
The 4.1% CPI growth was higher than rental increases for multifamily units in all but nine states, and only six states had rental growth higher than the 4.5% annual wage growth in 2023. The difference was even more stark when measuring rental price increases in the single-family rental market, where only two states had higher rate increases than wage growth, and only three had rental increases that were higher than the CPI.
“Slowing rental cost increases are good news for millions of prospective homebuyers priced out of the market by high home prices and higher mortgage rates,” Gupta said. “With rental rates rising more slowly than wages for the first time in several years, and a massive amount of new rental inventory on the market, tenants are in better shape today than in quite some time.”
The state of the rental market
According to Redfin, asking rents have flattened as the pandemic moving frenzy has subsided and landlords are grappling with vacancies due to a jump in apartment supply.
Redfin found that the median U.S. asking rent rose 1.1% year-over-year to $1,964 in January, the largest annual increase since March 2023, and was unchanged from a month earlier. And while rents ticked up from a year earlier, the bigger picture is that rent growth is leveling off after surging during the pandemic and then rapidly slowing from mid-2022 to mid-2023. Year-over-year rent growth has hovered between -2.1% and +2.4% for the past year, a much narrower range than the prior year, when rent growth was as low as 4.8%, and as high as 17.7%.
Click here to view Beekin’s Year-End Rental Analysis for 2023.
