Americans are finally starting to see the red-hot rental market begin to cool off after record growth.
A combination of strong demand, low supply and high inflation have kept pressure on rental prices nationwide but, for the first time in 20 months, asking rental prices saw negative growth, falling 0.1% from July to August, according to CoStar Group.
CoStar Group, a provider of online real estate marketplaces, information and analytics, said this points toward a "deteriorating rental market."
It is, however, welcome relief for Americans who have seen their rents rise while dealing with inflation.
Rent prices climbed during the first half of 2022, hitting a national average of $2,495, according to HouseCanary's National Rental Report.
While rental prices are still rising year-over-year, the pace of growth is slowing. Asking rents fell to 7.1% in August, down from 8.4% at the end of July, according to CoStar.
Cities that saw the fastest growth in rents in 2021 are now witnessing the largest pullback.
Palm Beach saw the most dramatic slowdown in growth, where asking rents decreased from 30.6% in the fourth quarter of 2021 to 8.2% at the end of August, according to CoStar. Phoenix followed close behind with year-over-year rents dropping to 5.2% in August compared to 21% at the end of 2021. Rents in Tampa and Las Vegas have also fallen by double digits this year.
Still, nearly half of all renters in the U.S. are paying 30% or more of their annual income on rent, according to a report from Harvard University's Joint Center for Housing Studies.
Marissa DuBee remembers having "sticker shock" when searching for a rental this summer.
DuBee, a 30-year-old social media marketer, and her fiance Troy, a commercial truck driver, had been renting a fully-furnished, 1,700 square foot, three-bedroom home in Greentown, Pennsylvania, for $1,250 a month. She told ABC News that their landlord decided to cash in on the hot-housing market this spring and sell the home, which meant they had to move into the basement of her mother's house until they could find an affordable rental. She said the two are trying to save as much as they can for their November 2023 wedding.
"It's always tough to go back once you've been out on your own," she said. "And we were very fortunate and lucky enough that my mom let us live there with open arms."
DuBee said they currently pay $1,300 a month for a much smaller rental in the same town: a single-wide mobile home with three bedrooms.
"The both of us are working as hard as we can to make ends meet to plan the wedding of our dreams," she said. "It definitely is challenging especially with the cost of everything just going up, but in the end we know it'll all be worth it."
Housing accounts for about one-third of inflation. The Consumer Price Index reached an annual rate of 8.3% in August, the highest in nearly 40 years, the Labor Department said. Average hourly earnings rose 5.2% in August from a year ago.
With a rental budget of $4,000 a month, 22-year-old college graduate, Grace Villiano, thought she and her roommate would have plenty of options when they were looking for an apartment this August in Manhattan. What they found was intense competition and bidding war for too few apartments.
"Every apartment we would schedule an open house to see would be sent into contract within 20 minutes of us contacting the property," Villiano said. "We would have people walking in front of us offering multiple thousands above asking. It was honestly, overall, very frustrating that we felt we could barely get our foot in the door and that we would ultimately have to agree to an apartment without being able to see it or perhaps even see a floor plan."
While rent prices are showing signs of stabilizing in some markets, New York City rents remain at a record high. This summer, the average monthly rent in Manhattan topped $5,000 for the first time, according to a report by the real estate appraiser Miller Samuel.
A New York City property manager, with over 2,000 rental units in Manhattan, said inflation is also impacting landlords. Speaking with ABC News on the condition of anonymity, the property manager said, "We're paying more for utilities like water and gas, more for maintenance and staff, which is the main reason why rents have remained elevated."
The property manager also said current rents in the city may seem artificially higher because they are being compared with prices during the height of the pandemic, when many landlords were slashing rents and offering major perks to lure renters back to big cities.
For many Americans, rising mortgage rates continue to complicate the question of whether to buy or rent, experts said. In some markets, mortgage payments are the highest on record relative to monthly rent.
According to the Mortgage Bankers Association, the median monthly mortgage payment was almost one-and-a-half-times as much as the median monthly asking rent in the second quarter.
Analysts said that may have forced many people, especially first-time homebuyers, to hold off on buying a home, adding further pressure on rental prices.
But there are reasons for optimism. Analysts said a record volume of apartment construction over the next year could help ease a supply crunch which, in turn, would work to keep rental prices in check.
CoStar projects rent growth will continue to slow in the coming months, ending the year 6.2% higher than last year. Things are expected to decelerate even further in 2023, when CoStar projects rents to rise 4.9%.
While renters don't have much control over rising prices, experts said renewing your current lease will likely give you the smallest increase in rent, since renewal rates typically tend to be lower than rents being offered to new renters. They they also recommend locking in a longer-term lease to avoid higher annual rent increases.