Rental prices in 2023 – Here's what to expect

As we begin 2023, the rental market is seeing a steady increase in rent prices. The average cost of rent for a one-bedroom apartment in Florida is now hovering around $1,400 per month. In this article, we aim to explore some of the key factors that are currently driving these trends, and provide some insight into what renters can expect over the year.

Rent Prices will Climb Above the Average

The Covid-19 pandemic had a significant impact on the rental housing market, causing rent prices to surge across the country. Although rent is still expected to increase in 2023, the pace of growth will be slower. Landlords and property managers who faced financial setbacks during the pandemic are raising rent prices to recoup their losses. While experts predict a gradual decline in rent prices over the next five years, higher interest rates, mortgage rates, and migration to big cities will likely keep rental housing prices on the rise for the time being.

According to the Federal Reserve Bank of Dallas, the year-over-year growth in rental prices is expected to increase from 5.8% in June 2022 to 8.4% in May 2023. This forecast is based on data from the federal government’s consumer price index. Meanwhile, Moody’s Analytics is also forecasting a rent growth rate of 5% to 7% during the same period. Thomas LaSalvia, a director of economic research at Moody’s Analytics, notes that before the Covid pandemic, annualized rent price gains were typically about 4% to 5%.

Migration will also have a Deep Impact on Rent Prices

As rent prices continue to rise in 2023, many renters seek ways to save money on housing costs. One option is to move outside major cities and into the suburbs, where rents may be more affordable. This trend of migration to suburban areas is contributing to higher demand for rental properties, driving up rent prices. For instance, in Florida, a surge in population growth since the pandemic has led to an increase in demand for both homes and apartments, causing rent and home prices to soar.

According to Richard Lawson from CoStar News, Florida’s population rose by 1.9% between 2021 and 2022, which is the highest of any state since 1957, according to a report from the National Association of Realtors citing U.S. Census data. While some U.S. states like California and New York are experiencing a net loss of residents, many people are choosing to move to suburban areas for job opportunities and more affordable housing options.

Inflation and Rent Prices

Inflation and high demand will continue to impact the rental market, causing rent prices to increase across the country. According to the U.S. Bureau of Labor Statistics, the Consumer Price Index rose 6.4% over the past year, with shelter costs experiencing the largest yearly increase since June 1982 at 7.9%. Though inflation is starting to ease, experts predict that high inflation rates will persist into 2023, leading to further increases in rent prices.

With rising rent prices, low inventory, and a recovering economy, now is an ideal time for property owners to rent and maximize their return on investment by taking advantage of these market conditions.