Will Rent Prices Go Down in 2023?

It’s no secret we’re in the midst of a housing crisis in the United States. According to the Joint Center of Housing Studies at Harvard University, more than 12% of households in 44 states struggled to pay rent in early 2021. In some states — Mississippi, Delaware, Louisiana, Alabama and Georgia — the number exceeded 20%.

Causes include inflation; a chronic shortage of affordable housing; slower renter household growth; higher unemployment due to the pandemic; and systemic racism in the housing and job markets, with Black Americans at a particular disadvantage. Find out why is housing market down.

Taken together, these issues left millions of Americans unable to afford their rent or become “rent-burdened,” meaning more than 35% of their income goes to rent.

It’s no wonder many of us are scouring the internet for good news about rent prices. Surprisingly, there are several reasons to be optimistic.

For a clearer picture of what renters can expect, we spoke with Taylor Marr, deputy chief economist at Redfin, and Bob Pinnegar, president and chief executive officer of the National Apartments Association. Here’s what they had to say.

Rent Prices in 2023

Top economists project rents in 2023 will actually be cheaper than we’ve seen in the past few years. Marr says national rent prices “peaked in early 2022 and have been on a downward trajectory ever since.”

The average national rent for an apartment dropped below $2,000 per month in December 2022, and Marr has already seen rent prices fall in 14 out of 50 metropolitan areas. This sets the stage for a particularly favorable market for renters, especially those considering moving or renewing a lease.

Regional variance

Of course, rental prices and markets vary greatly by geographic region. Marr says some “boomtowns” like Raleigh, Nashville, and Charlotte will see more price gains as demand for housing rises.

Additionally, as smaller Midwestern cities accommodate the “boomerang generation”—millennials who moved to the coasts to start their careers, then returned to the states they came from — Marr is seeing rent prices in Indianapolis and Cleveland rise between 14% and 16%.

However, in larger cities like Minneapolis and Chicago, rent prices are dropping — 9% and 4%, respectively, year-over-year as of December 2022. These can be partially attributed to greater housing supply, due to local zoning laws and other policy changes.

Pinnegar also emphasized the positive effects of increasing affordable housing supplies. “Fluctuations in rent prices ultimately trace back to supply and demand,” he says. “Many economic forecasts hope that this year will see decades-high apartment completions, which could help make tangible progress in remedying our country’s housing supply/demand imbalance.”

While it’s impossible to generalize rental prices for all regions, Marr says many Americans can expect rent prices to drop by a few percent nationally in 2023.

Incentives vs. price decreases

Now, the form these decreases take will also vary. While it’s unusual for landlords drop prices during lease renewals, Marr says individuals starting new leases may see decreases. “Rises in vacancy rates are tracked by multiple companies, including [Redfin], and that puts pressure on landlords to lower rents and fill units,” said Marr.

Additionally, if rent prices remain the same, renters may see more offered incentives, like a free month’s rent or included parking. That’s because such concessions are much less costly for landlords than maintaining vacant units.

How to Score Rent Deals in 2023

So how can renters best leverage their bargaining power in this more favorable market? Marr offers this advice to clients, friends and family:

1. Take advantage of seasonal trends: Rental prices are highest during peak moving season — May through August — and lowest during the winter. If possible, try to move in winter to score a monthly rent discount of $100 to $200. If you’re worried about breaking your lease, don’t be. Marr says you can typically negotiate an early release. Talk to your landlord 30 to 60 days before you’d like to move out and explain your rationale. If they’re concerned, offer to help list the unit, take good photos of it, and try to find a replacement tenant or sub-letter.
2. Negotiate: Though it may seem intimidating, now is the opportune time to negotiate additional benefits with your landlord. As Marr says, “The worst thing they can do is say no.”
3. Keep an eye on your local market: Always enter a rent negotiation with accurate and applicable information. Marr suggests turning to Rent.com, finding your city and clicking “Market Trends” at the top to identify specific data you can use before signing.

Hope on the Horizon

When I asked Marr what he wanted readers to know about the housing market, he cited an important statistic: eight of 10 Americans live within 100 miles of where they grew up. That’s partly due to affordability. But Marr also says it’s easy to believe misconceptions about the cost of moving into a neighborhood with greater chances of economic mobility, especially through better-performing schools.

According to Marr, good real estate deals can exist within those pricier neighborhoods, too. Readers, he says, should “take where they live with intention, rather than defaulting to where they were born or the first apartment they moved into.”

He also emphasized the housing situation is “changing faster than ever, from week to week.” With this in mind, he encouraged readers to leave their options open.

In 2021, it was more financially advantageous to own a house. In 2022, rising mortgage and interest rates tipped the scales toward renting. Now, experts are seeing mortgage rates fall, offering an opportunity for first-time home buyers.

Above all, if it is financially possible, try to speak with a lender or real estate agent to get a sense of what options might be best for your situation. Stay as informed as possible so you’re prepared to make advantageous economic decisions when the opportunities arise. Here’s to a prosperous 2023!