Rent price growth is at its lowest level since 2020, saving the typical renter $2,316 a year, according to Zillow data.
Rent growth is at its lowest level since 2020, giving the typical renter an additional $193 per month, or $2,316 per year, toward a down payment or other savings goals.
The median asking rent in March was $1,910, up 1.8% from the same month last year, Zillow reported Tuesday. Multifamily rents rose 1.3% year-over-year to $1,757, while single-family home rents ($2,225) had the slowest annual growth in Zillow’s data series at 2.5%. These trends represent a notable improvement in affordability, with the typical household spending 26.5% of its income on housing, finally approaching its pre-pandemic rate of 25.8%, according to the report.
Renters in the Sunbelt are experiencing the biggest savings, with the typical renter in Austin, Texas ($3,182) and Tampa, Florida ($3,110) putting four figures back in their pockets when you factor in increased income and lower rents. Rental trends in several Western markets, including Denver ($3,002) and Los Angeles ($2,438), are also delivering significant annual returns for renters.
Kara Ng |Credit: Zillow
“For the first time in years, income growth is outpacing rent increases,” Zillow senior economist Kara Ng said in the report. The typical household earns an additional $2,318 a year, enough to cover several months’ worth of groceries, a year’s worth of phone and internet bills, and make meaningful savings decisions. ”
In addition to slowing rent growth, Zillow found that two in five rental properties offered concessions in March. The portal said the benefits include one month’s free rent, waived application and pet fees, and discounted parking. These incentives can save the typical renter at least $2,000. That’s not a small amount considering that less than half (48 percent) of would-be homeowners say they have enough saved for a down payment.
The softening of rental and condominium trends has created a wealth of opportunities for renters to become homeowners. Mortgage rates are more favorable than they were this time last year, despite increases caused by the Iran conflict, which led to mortgage payments for typical U.S. homes falling 4.4% year over year.
“For renters who have felt for years that homeownership was slipping out of reach, the combination of an expanded savings cushion and lower monthly payments is a meaningful shift in calculations,” the report says.
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Despite the rise in affordability in March, there is still work to be done to increase the likelihood that households will purchase a home.
The income a household needs to pay typical rent is $76,400, 35 percent higher than the pre-pandemic norm. Meanwhile, a household needs an income of about $114,000 to buy a median-priced existing home, a 70% increase from 2019 ($67,000).
This keeps some prospective buyers in the rental market, with nearly 1 in 13 for-sale shoppers also viewing rental properties on Zillow.
“While this momentary relief will not eliminate affordability challenges that have built up over time, it will give renters more flexibility than they have in recent years,” Ng said.
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