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Rental prices for one- and two-room apartments rose in March for the first time in six months.
The monthly cost of a one-bedroom apartment in the U.S. rose to $1,487, up 0.3% from February. The price of a typical two-bedroom apartment also rose 0.5% to $1,847, according to a new report from Zumper, a real estate data site.
While prices rose overall, there were declines in some metropolitan areas. For example, the rent price for a one-bedroom apartment in Baltimore, Maryland, is $1,390, down 0.7% from a year ago, according to Zumper.
Arizona is unique in that all major metropolitan areas studied have experienced rental declines. Nationally, the average price of one-bedroom apartments fell to $1,311 in March, down about 4% from $1,365 a year ago, according to Zumper data.
The slight price increase in the broader rental market could be a reflection of old seasonal patterns, experts say.
“That’s kind of to be expected,” said Crystal Chen, a spokeswoman for Zumper. “As we get into the warmer months, demand increases.”
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“During the colder months of the year … the rental market tends to be cool,” said Jacob Channel, senior economist at LendingTree. “The closer we get to summer, the more rental prices rise.”
However, some fundamental factors such as supply and demand could also be reflected, said Susan M. Wachter, a professor of real estate and finance at the Wharton School of the University of Pennsylvania.
Why prices are falling in Arizona
Some markets in the country are cooling down more than others. Prices are falling in the Sun Belt and intermountain areas, and Arizona is a prime example, Chen said. Zumper defines the Intermountain Region as Arizona, Nevada and Colorado.
“All of the Arizona cities in our report had either flat or declining interest rates year-over-year,” she said.
For example, the city of Glendale saw the biggest drop in rents, where prices for one-bedroom apartments fell more than 10% compared to this time last year.
Arizona has a large supply available online, which keeps rental prices low in the area, Wachter explained.
“In the data, in addition to seasonality, there is some evidence that fundamental factors also play a role,” she said.
Phoenix is expected to add more than 33,000 new units this year, and many buildings in the state are offering benefits such as: Such as waiving deposits or application fees and up to two months of free rent, Zumper noted.
“If you're in this market, it's a good time for renters to secure an apartment with a lot of amenities that would otherwise have been unaffordable,” Chen said.
Supply plays a role in rental prices elsewhere
While the Sunbelt and Intermountain Regions are expected to see an increase in supply, many markets in the Midwest and Northeast are undersupplied, leading to an increase in rental prices.
“The offering that is available online absolutely varies by market,” Wachter said.
According to Zumper, rent prices for one-bedroom apartments in New York City are up 25% compared to last year. Rent costs and intense competition are also impacting areas such as Columbus, Ohio and Norfolk, Virginia.
But while prices rose, they fell significantly compared to last year and even more so compared to the market volatility of 2021 and 2022, when pent-up demand kept prices high.
“Rent prices are rising and they are expensive, but they are not suddenly going up again,” Channel said.
“We do not expect national interest rates to rise at all like in 2021 and 2022,” Chen said. “Seasonality is returning after two crazy years.”
While many factors influence housing affordability in the U.S., the most important, put simply, is poor supply, Channel said.
“The more rental units that are built, the lower the prices are likely to be, and I think Arizona shows that really well,” he said.