Housing Market Insights for 2023

Broker Noble Black from Corcoran Group recently joined Barney & Company to discuss various factors influencing the housing market, such as builder confidence, mortgage rates, and Congressional efforts to tackle the housing crisis.

Good news for renters: relief from rising costs appears to be on the horizon this year. Forecasts suggest that as markets stabilize, rent growth will slow, reaching affordability levels not seen in four years.

According to an analysis by Zillow, multifamily rental prices are projected to stay mostly stable through the end of 2026, with a slight decline of about 0.2%. On the other hand, rent for detached homes is expected to increase by approximately 1.1% annually by December 2026. The report indicates this will represent a significant slowdown from previous years. Factors such as rising vacancy rates and new apartment constructions are likely to temper rental increases, enhancing landlords’ negotiating positions. Interestingly, rent for single-person households saw a 2.7% increase last month compared to last year.

In January, the average asking rent was reported at $1,895, which is just a tiny 0.1% bump from December and a 2% rise from the same month last year. This aligns with the lowest annual growth in rent since December 2020, as the market stabilizes after that pandemic-induced spike.

Household Growth in Texas

The household growth rate in Texas’s capital is impressively outpacing the national average, which is quite noteworthy.

In the past year, multifamily rent growth has noticeably slowed, with a mere 1.4% year-over-year increase. Zillow suggests that this trend may continue, indicating potential relief for renters.

Amid the deceleration of rent increases, affordability measures are being updated to reflect current conditions. For instance, the average household is now spending 24.3% of its income on rent, down from 25% in February 2020. Another metric also shows that households are spending an average of 26.4% of their income on rent—the lowest share since August 2021.

Rising Home Prices & Affordability

While U.S. home prices are on the rise, some fast-growing markets are still considered affordable for renters, according to Zillow’s findings. Notably, metropolitan areas like Miami (37.2%), New York City (36.9%), and Los Angeles (34%) have significantly higher rental burdens compared to the national average. In contrast, major cities that offer more affordable options include St. Louis (19.7%), Minneapolis (19.4%), Denver (19.4%), Austin (17.9%), and Salt Lake City (17.9%).

As Orphée Doviongay, a senior economist at Zillow, observed, leasing firms are navigating a vastly different environment than they did a few years back. With increasing supply and vacancies, property managers must adapt regarding pricing and lease terms. Indeed, concessions are almost at all-time highs, leading to modest rent growth and meaningful opportunities for renters.

Market Cooling Post-Recession

As the housing market cools, price growth has hit its slowest pace since recovering from the Great Recession. Zillow notes that landlords are increasingly capitalizing on their negotiating power to win more concessions in lease renewals and new agreements.

Interestingly, almost 40% of rental properties listed on Zillow in January included at least one concession—like a month of free rent or reduced security deposits. Although this figure is slightly down from a record high of 41.1% last January, it remains elevated when viewed through a historical lens.