According to real estate data firm Costar, rents followed a similar trajectory in the second quarter, with the average monthly payment for an apartment rising 9.2 percent in the three-month period ended June 30. This is compared to back-to-back spikes of over 11 per cent over the past two quarters.
Change comes in the form of pervasive economy is shrinking and created fear of recession. Analysts and real estate professionals say housing inventory has risen in some parts of the country, as rising inflation has driven home buyers back.
“The recent moderation in fare growth is directly linked to the weak demand we’ve seen over the past 90 days,” said Jay Liebick, national director of multifamily analytics at CoStar.
Ever since the Federal Reserve began raising its benchmark interest rate in March, mortgage rates have been climbing steadily to put a lid on runaway inflation. Consumers, in turn, are looking to larger monthly payments when they are already paying more for staples like groceries and gas. Saving for a down payment is also difficult.
As a result fewer people are seeking mortgages, mortgage demand has hit a 22-year low in June as rising interest rates and fears of a slowdown will deter buyers.
With landlords still surging rents, and home loans becoming more expensive, many renters find themselves playing the inflation-beating game to maintain their standard of living.
Josh Martin, a 25-year-old tech worker who lives on the north side of Chicago, wants to buy a condo in the $250,000 range because “rents are crazy right now, and I’m afraid it’s going up.”
He currently pays about $1,000 for a studio apartment, but says the price of a smaller unit in his apartment complex rose to $1,300 on the website. The median rent for a bedroom in Lakeview, Chicago, where he lives, is $1,700, a 22 percent increase from last year, according to rental platform Zumber.
He faces a predicament: Is it better to buy a home in a hot market when a recession may be just around the corner, or to keep up and run the risk of a big rent increase? It’s hard to tell these days.
Martin was still on rent as of Monday.
Others are trading down amid rising costs. Penn Johnson, 62, says he sold his home in affluent Fairfield County, Conn., last year and started renting. He owned a house for 32 years before downsizing.
“I thought I’d rent for a year and decide what to do next,” Johnson said, not knowing that the volatile housing market would drive mortgage rates up almost 50 percent.
Now he doesn’t know what to do: While renting is comfortable enough, he didn’t want to do it forever. But nearing retirement age, he didn’t want to pay thousands in monthly mortgages. Plus, the rent is hardly cheap: He’s paying $4,200 a month for a place that probably used to go for $3,000.
“And I’m like, darn it, I’m stuck,” he said. “I’m quite a financially successful person. I can buy stuff, but it’s hard to make sense of it.”
He is one of many Americans showing panic about what happens next. The Consumer Sentiment Index, a widely followed measure of consumer attitudes maintained by the University of Michigan, is near a 50-year low.
For sellers, it marks the end of the “name your price” era. Johnson, who works in residential lending, said more sellers are accepting offers below their asking price.
,[Sellers] It felt like they had a lot of market power, and I think that market power took away as the market became more balanced,” he said.
Since consumer spending accounts for two-thirds of the US economy, policymakers are watching it closely for signs of contraction. So far, it hasn’t slowed much: Spending climbed a healthy 1.1 percent in June, the Bureau of Economic Analysis reported on Friday, up from the 0.2 percent recorded in May.
But that increase came during a month when gas prices were hovering near record highs—the national average surpassed $5 a gallon for the first time. And there are signs that some consumers are cycling for cheaper alternatives. Discount Retailers Like Dollar Tree report good That they are gaining market share over their costlier competitors. Others, such as Walmart and Target, are Discount Consumers devote more of their household budgets to food, fuel and services as they spend additional inventory, cutting back on some of their purchases.