Asking rents climbed by $6, or 0.3%, from January to February. That’s the first month-to-month enhance in rents in 5 months, since they final rose in September 2022, based on a latest survey. The 0.3% enhance is simply considerably smaller than the everyday February enhance of 0.4%, averaged over knowledge from 2016 to 2020, suggesting that the rental market stays considerably cooler than regular.

Typical asking rents on the nationwide degree now stand at $1,976, which is 6.3% increased than one yr in the past, however 0.5% under the height of $1,987 noticed in September 2022. That annual progress price is now down greater than 10 share factors from the height progress price noticed one yr in the past this month: 17.0%, the record-high tempo reached in February 2022.

Month-to-month adjustments: Winter involves Florida

The steepest month-to-month declines in lease had been noticed this February in Cleveland (-1.0%), Jacksonville (-0.4%), Salt Lake Metropolis (-0.4%), Richmond (-0.3%), and Miami (-0.3%). That bucks the latest pattern of largely Western cities, plus New Orleans, having the biggest lease drops earlier this winter. The substantial declines noticed in two of Florida’s main metropolitan areas suggests some cooling might lastly be arriving after years of very speedy lease progress.

Rents rose probably the most on a month-to-month foundation in Hartford (1.3%), Sacramento (0.9%), Chicago (0.8%), New Orleans (0.6%) and Raleigh (0.6%). Many of those markets symbolize extra reasonably priced options to competing cities, which can clarify their lately climbing rents.

Western markets: Stepping off the curler coaster

Rents are very near the place they had been final February in a number of inland West markets. On a year-over-year foundation, rents are down 1.0% in Las Vegas, and solely up modestly in Phoenix (1.0%), New Orleans (1.8%), Sacramento (2.5%), and Baltimore (2.9%). Annual lease progress didn’t fall a lot additional in these markets from its tempo in January.

The Western markets could also be going by way of a lull after breakneck lease progress in 2021, after they noticed an excessive amount of migration from costly West Coast markets, adopted by some imply reversion in lease progress in 2022. The cumulative impact, although, is that rents nonetheless stand a lot increased than pre-pandemic: 3-year progress in Phoenix, for example, continues to be a staggering 37%.

Annual lease progress was highest in Cincinnati (9.4%), Indianapolis (9.1%), Louisville (8.9%), Kansas Metropolis (8.2%), and Boston (8.1%), reflecting the continued energy of demand in reasonably priced, mid-sized Midwestern metropolitan areas, in addition to a belated rebound for Boston. Miami’s absence from the highest 5 MSAs for year-over-year lease progress can also be notable, after rising the quickest earlier within the pandemic.

The most costly main market is San Jose, the place typical month-to-month lease is $3,189, adopted by San Francisco ($3,084), New York ($3,084), San Diego ($2,959), and Boston ($2,958).

The start of a return to regular?

Not solely did month-to-month lease progress in February break its 4-month streak within the crimson; it additionally climbed a lot nearer to common pre-pandemic progress charges for that point of yr. In every of the final 3 months, the month-to-month progress price was 25 to 30 foundation factors decrease than the pre-pandemic common: -0.41% in November (vs -0.11%); -0.26% in December (vs -0.01%); and -0.06% in January (vs 0.21%). However this February, progress was solely 13 foundation factors under the 0.43% averaged presently of yr within the 5 years of knowledge from 2016 to 2020.

If month-to-month lease progress for the remainder of the yr merely matches its pre-pandemic common progress price in every month, the annual tempo of progress would proceed to decelerate, from February’s 6.3% to a low of three.0% in September. A standard yr of lease progress can be a serious aid for renters after final yr’s blistering tempo of lease hikes. 12 months-over-year lease progress has already dropped precipitously, from a record-high of 17.0% in February of 2022.

The deceleration of annual asking lease progress in February solely heightens the distinction with official inflation measures of lease progress, just like the Client Value Index’s Lease of Main Residence element, which grew 8.6% in January (the latest month obtainable presently). Earlier analysis suggests a 12-month lag between annual ZORI (Zillow Noticed Lease Index) progress and annual CPI Lease progress, giving trigger for hope that the year-over-year progress within the latter may start to decelerate someday quickly.

One small knowledge level in line with such a slowdown was that the compounded annual progress price of January’s month-to-month change in CPI Lease, 8.8%, was already down measurably from its pandemic-era peak of 11.1% in September of 2022. On condition that month-to-month CPI Lease progress accelerated sharply final Could and June, these months is likely to be the most definitely time this yr to see a peak and turning level in year-over-year CPI Lease progress.