Is the Recent Rent Correction Reversing Course?

After unsustainable increases over the last several years, rents on multifamily apartments, single-family rental homes, and townhomes went through a brief correction, but it appears rents are now rising again, Forbes reports. After a slight pullback during the final months of 2022, rents rose by 1.3% in three months and are expected to see sustained growth of 3% to 5% throughout the remainder of the year.

Rising demand and limited supply in the rental market are driving up prices and bringing an end, or at least, a pause, to a nationwide rent correction.

The renewed up-trend may be indicative of several favorable factors of interest to investors in residential real estate:

Growing Demand: The rent hikes reflect increased demand for rental properties, and we can see strong absorption happening so far in 2023, keeping up with new supply. It will be important to watch the balance between completions (ready to increase in the second half), and demand as we continue into the fall and winter.

Improved Sentiment: Consecutive rent increases correlate with positive economic conditions, such as job growth, rising incomes, and sentiment about job security. These factors can lead to increased household formation and a greater number of people seeking rental accommodations.

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