Renters about to catch a break as rents post their biggest drop in 3 years

• The median US rent saw its largest annual decline since March 2020, Redfin said.
• Renters have more options given more vacancies and a decline in people looking to move.

Rent prices fell by the most in more than three years in May, as changes in the housing market's supply and demand tipped the scales against landlords.

The median US asking rent was $1,995 last month, down 0.6% from a year ago and the steepest annual decline since March 2020, when the COVID pandemic upended the housing market, according to a Redfin report last week. On a revised basis, the decline is also the first annual drop since March 2020.

"Rents have cooled in part because the number of rentals on the market has grown, giving landlords less leeway to hike prices because they're grappling with a rise in vacancies as renters get more options to choose from," Redfin said.

This is partially as homeowners are electing to rent out their properties instead of selling them, given the recent surge in 30-year-fixed mortgage rates, according to the real estate data tracker.

"Many homeowners are deciding that instead of selling, they're going to renovate their current home or rent it out while they wait for the market to improve," a Redfin real estate agent in Sacramento, Calif., said.

Additional rental supply is also coming from builders. Redfin noted a surge in completed multifamily construction projects, adding to tenant options. In April, the amount of such units grew 24.2% year over year.

Meanwhile, rental demand is lower because fewer people are moving amid economic uncertainty, weak household formation, still-high rents in many markets, and inflation, according to Redfin.

To be sure, rents rose 1.4% from the prior month and annual changes varied geographically, with the West seeing a 2.1% year-over-year decline while other regions saw increases.

The West is also leading in new multifamily housing, having built 440,000 new homes in the first quarter. That's compared to around 200,000 completed constructions in each of the remaining regions.