Currently, there is no doubt that rental prices are high. In some markets, prices are nearing record highs. Rent increases are highly affecting the monthly budgets of many Wilmington renters. It’s understandable why, given that listed rents have increased by 15% nationally and by as much as 30% in some cities. Concurrently, rising inflation and interest rates are pricing many buyers out of the housing market, thereby increasing the pressure to rent. What then is the origin of this pattern? When will the cost of renting begin to decrease again? Here is a look at the current state of rental prices and the reasons why experts predict that they may start to decline soon.
Why is Rent So High?
Right now, a number of factors are raising rental costs. These include the sluggish pace of new construction, a highly competitive residential real estate market, fewer rental properties on the market, and the residual effects of the eviction moratorium imposed during the pandemic. Let’s observe each aspect more closely.
Slow Pace of New Construction. The market for single-family homes has been thriving for several years, but this growth has not translated into the construction of many new apartment buildings. It is much more profitable for developers to construct single-family homes or luxury apartments than to construct more affordable housing. As a result, there haven’t been enough new housing units to meet demand, which has made the rental market tight for years.
High Home Prices. The state of the home buying market is an additional factor driving up rental costs. Many markets have experienced all-time high prices as a result of years of steady price growth. Moreover, rising mortgage rates have made it more difficult for prospective buyers to afford a home. More people are resultantly compelled to rent rather than buy, further increasing costs.
Fewer Available Rentals. Fewer rentals are currently on the market as a result of the high demand and constrained supply. The number of rental properties offered nationwide has lowered by 20% since 2019 according to a recent Apartment List report. In certain markets, the quantity of available units has decreased even more.
The Eviction Moratorium. The moratorium on evictions is the final factor raising rents. The moratorium executed last year to shield tenants during the pandemic has made it tougher for Wilmington property managers to evict non-paying tenants. Because of this, a lot of landlords are reluctant to rent to new tenants because they worry they won’t be able to make up their losses if the tenant doesn’t pay.
When Will Rent Start to Go Down?
Now that we’ve reviewed the factors that are driving up rental costs, you may be curious when they will begin to decline. It is difficult to state with certainty. But there are indications that the rental market may soon begin to slow down. One is the slowing down of single-family home sales. This may cause more people to remain in their present residences rather than relocate, thereby reducing the demand for rental housing.
The fact that new apartment construction is finally starting to pick up is another indication that rents may begin to decline. Tax code changes that increase the profitability of renting out properties have contributed to this. The limited supply of rental properties should therefore be relieved, and prices should be kept in check, even though it might take a few years for these new units to become operational.
There is therefore some hope that relief may be on the way if you are feeling the pinch of high rents. But to help you get by in the interim, create a careful budget and comparison shop for the best offers.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.