Accross the country the price of rent is leveling off, and in some places it's even dropping.
A new report from Zillow shows that rents were up just half a percent in July, which appears to be the smallest gain for any month since 2012.
Aaron Terrazas, a senior economist for Zillow, joined KERA to crunch the numbers.
What's behind the current slowdown
That was driven by young adults deciding to rent for longer. It was also driven by people who have lost their homes to foreclosure during the bust. There's this surge of rental demand and now, that's finally starting to slow down. We're seeing both at the same time: a pickup of rental supply, a lot more apartments and rental homes on the market, and a slowdown in rental demand. Many of those young adults who had delayed buying their first home during the bust have been out in force in the past year and a half out buying. There's a little bit softer rental demand because of that.
On this becoming the new normal
I do think kind of we have seen a lot of new supply come on the market over the past couple of months, but I think it's going to level off. I think rent appreciation is going to stay in the low zero to 2 percent across the country over the next two years. There are so many unknowns.
An important caveat here is that we're seeing very different trends at the top and the bottom markets. So you think of those most affordable third of rentals. Rents are still appreciating 3.5 percent in the Dallas market for those units. At those top-end luxury units, that's where we seeing the biggest slow down in rents. And the Dallas market is by some measures kind of less affordable than it has been historically, but it's much more affordable than the rest of the country.
I think the incentives to buy are still very strong in the Dallas market, more importantly those that can afford to buy are doing so and there is still demand at that bottom of the rental market.
On how this affects the market in North Texas
It really depends at what price point you are looking at. If you are looking at those luxury high-end units, it's around $2,300, $2,400 a month. Recognize you do have more bargaining power, particularly in new buildings. Some property managers and landlords are offering concessions— things like free parking or a month free. Be on the lookout for those offers. If you are in the bottom of the market and shopping for that more affordable tier of units, roughly median rent of $1,200 a month, recognize that competition is still strong out there and that these nationwide marketwide trends don't nessecarily hold at that price point.
Interview responses have been edited for clarity.