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Despite mortgage rates at a seven-year high and rising home prices and low inventory that are keeping consumers from buying homes, rental prices are declining in many markets.
The rate of rent growth has been slowing for seven consecutive months and finally went negative in September, the first national year-over-year decline since 2012, according to Zillow. If September’s results turn into a trend, it could influence the loan count and mortgage applications could continue their decline.
“Today’s data are yet another signal that the housing market is easing toward a more normal, sustainable pace after the frenzy of the past three years,” Aaron Terrazas, Zillow’s senior economist, said in a press release. “With slowing rents and home value growth, searching for a new home should be somewhat less competitive than it was a year ago, giving renters and buyers a bit of breathing room.”
While rents are still high historically, would-be first-time homebuyers struggle breaking into the market with expensive sales prices, high home value appreciation and big down payments preferred.
“Housing plays a central role in most people’s finances, but for people already in their homes with fixed mortgages, there’s minimal spillover. For renters, slower rent growth is welcome news and will put more spending money in their already stretched pockets,” said Terrazas.
“The slowdown in new construction is more worrisome for the overall economy: Homebuilding has been a net contributor to economic growth and employment, but rising costs mean that it could shift toward a drag in the future.”