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Rent costs are leveling off and even dropping around the U.S.

MARY LOUISE KELLY, HOST:

Here's some good news for renters - the cost of keeping a roof overhead is no longer going through the roof. After a rapid jump in recent years, rents have begun to level off around the country. In some areas, rents are even falling. NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: Elsa Marie moved to Tempe, Ariz., in 2022, near the peak of that city's rental frenzy. Landlords were charging more than $2,000 for a house, and they wanted proof that Marie's job in the travel business paid at least three times that much.

ELSA MARIE: I'm a single mom, and I do not make that money. So I spent about a good six months sending in application after application.

HORSLEY: Marie eventually found a place, but it wasn't easy. Fast forward 14 months, though, and the hot Arizona rental market has cooled considerably. Marie's about to move to a different house that will cost her less and says her new landlord was happy to make a deal.

MARIE: It is exactly what I'm looking for and right next to my daughter's school, and I think it was all the timing. The market has been, like, stalemate. The houses have been sitting for at least three months. Landlords are kind of panicking.

HORSLEY: Rents around the country jumped by double digits a few years ago when the pandemic uprooted millions of people. Remote workers and retirees flocked to Sun Belt cities like Phoenix, Atlanta, Orlando and Charlotte. Rising rents also attracted builders to those cities. And it took time, but the supply of housing is now catching up to demand. Kim Betancourt, who tracks the rental market for Fannie Mae, says at least half a million new apartments opened their doors last year with many more in the pipeline.

KIM BETANCOURT: Right now, underway - what I call holes in the ground, cranes in the sky - a million units. That's a lot. We need it. We absolutely need it, but it's primarily concentrated in about 15-18 metros.

HORSLEY: Some of those same booming metro areas that saw the biggest run-up in rents two years ago are now seeing an actual drop in housing prices as landlords hustle to fill vacant buildings. Betancourt says that's good news for renters who've long since exhausted their pandemic relief payments and whittled down their savings.

BETANCOURT: You know, to a certain extent, the consumer's tapped out, right? I mean, yeah, I mean, inflation has come down, but we still had to spend last year paying 20 bucks for a burger and fries.

HORSLEY: Nationwide, Betancourt estimates rents rose less than 1% last year. Of course, not every part of the country has experienced the same rental roller coaster. In some areas, housing costs have grown more slowly and steadily.

BETANCOURT: It's a tale of two markets where if you're in some place that doesn't have a lot of new supply, you're probably still getting pushed on rents, whereas if you're in Austin, you could probably get a better deal, or in Phoenix or Jacksonville.

HORSLEY: In one sign of the softening rental market, more landlords are now offering concessions to get renters in the door - a month's free rent, an extra parking space, maybe just a fresh coat of paint in the tenant's choice of colors. Zillow's chief economist, Skylar Olsen, says a third of rental units are now offering such incentives compared to only about a fifth a year ago.

SKYLAR OLSEN: What we're looking at is, for the next year and maybe even, you know, next two years or more - softer rent growth. That's great for the renter, especially if wages continue to be relatively strong.

HORSLEY: Rents are unlikely to drop dramatically, though. There's a big population of Americans aged 20 to 34 right now who are in their prime renting years. And with the high cost of home ownership, many people may stay in the rental market longer. Elizabeth Walsh lives in a one-bedroom apartment in Reno, Nev., where she's a graduate student. Her rent has jumped by 18% over the last three years, so any relief now is limited comfort.

ELIZABETH WALSH: Besides for housing, everything else is extremely expensive. We have very high gas bills, food bills. It's definitely a very expensive city to live in.

HORSLEY: At the end of this month, Walsh is moving to a two-bedroom house. She'll have a new roommate and hopes to save a few hundred bucks each month.

Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.