RENTERS will soon feel relief as experts reveal housing costs will drop in three months due to the Federal Reserve’s moves to slash rates.
The new projections come after the Federal Reserve cut interest rates by half a percentage point last month, a move that will affect millions of Americans and marked the first time the central bank has cut rates since 2020.
Rental expert Jeff Klotz said the Fed rate cut will put downward pressure on rents[/caption]
Rental prices have already begun to fall in Austin, Texas and Phoenix, Arizona[/caption]
The rate cut is designed to regulate inflation, which economists say will stimulate the economy and make things more affordable for consumers.
Housing experts say that while the rate cuts will take some time to work their way into the economy, the rate-cutting cycle will likely put downward pressure on the cost of living.
While rents are rising in some parts of the country, new CoreLogic research reveals rents have started to fall in Austin, Texas and Phoenix, Arizona slipping 1.1% and -0.8% respectively.
By comparison, eight metro areas in the US posted gains of 4% with Washington D.C topping the country for the annual rent growth chart.
CoreLogic’s Principal Economist Molly Boesel told The U.S. Sun the recent rate decrease would put some downward pressure on single-family renters.
“Firstly, potential homebuyers who have been on the sidelines waiting for mortgage rates to fall, and who have been renting, would cause a softening in demand for rentals as they move into homeownership,” Boesel said.
“Secondly, multifamily construction that may have been on hold due to high financing costs may get completed, causing more supply of rentals.”
Housing experts say a federal rate cutting cycle will bring down the cost of construction and encourage more development which in turn increases the supply of houses.
Multifamily developer and investor Jeff Klotz said the rate cut will loosen up the housing market and make rents feel cheaper over time.
“The intention or goal of Fed rate adjustment is a balanced economy which makes rents more affordable or feel less high/expensive even if rent rates are increasing which they will do so over time regardless,” Klotz told The U.S. Sun.
“A stronger economy for everyone allows for your monthly rent payment to feel less expensive.”
Announcing the cut on September 18, Federal Reserve Chair Jerome Powell said the “recalibration” of the policy stance would help the central bank bring inflation back down to its 2% goal.
“Our patient approach over the past year has paid dividends,” Powell said last month.
“We have gained greater confidence that inflation is moving steadily towards our target.”
Federal Reserve Chair announcing the historic rate cut in September[/caption]
Private Asset Investments Expert Matt Willer said the Fed rate cuts were a “clear sign” that the economy was softening and that it would take about three to twelve months to fully weave their way into the economy.
Additionally, the change in stance from the central bank presented real opportunities, typically occurring only every seven to 12 years.
The decrease in rents is also a sign of easing inflation, real estate economists say.
The U.S. Sun last month revealed three American cities with the largest drop in rent prices.
Austin, Texas experienced the biggest decrease in asking rents in September, seeing a 9.3% drop in rent prices.
According to research from realtor.com, median rent for a studio in a two bedroom apartment is now $1,484, down from $1,641 the same time last year.
Rents are also falling in Nashville, Tennessee and San Antonio, Texas.
