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Rental prices were by far the “largest contributor” to the rise in inflation on an annual basis in March, according to data released by the Bureau of Labor Statistics.
While consumers paid less for gasoline and grocery, causing the consumer-price index – a widely used measure of inflation – to moderate to 5% in March from a year earlier, housing costs went up 8% during the same time period.
“This more than offset a decline in the energy index, which decreased 3.5% over the month as all major energy component indexes declined,” noted the Labor Department in the report.
March marked the ninth consecutive month of declines and the smallest year-over-year increase since 2021.
On a monthly basis, housing costs, which make up 40% of the index, declined to 0.6% from 0.8% in February.
Why is rent so high in the U.S. right now?
Over the past two years, the U.S. median rent rose 18%. That was largely because a competitive housing market and higher mortgage rates shut many people out of home buying. A strong jobs market and shortage of inventory also contributed to rising rents. However, newly constructed apartments are expected to hit the market this year, which should lower rental prices.
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What’s happening with rental prices now?
Rent growth continued to slow in February. Year-over-year increases dipped to 2%, the lowest yearly growth in 20 months and the sixth consecutive month of single-digit increases, according to Rent.com
The national median rent is $1,937, down from $1,942 in January. It is the lowest median rental price since February 2022 when rents were $1,904. Prices peaked in August 2022 at $2,053, after rising above $2,000 for the first time in May of that year. February’s rent level represents a 6% decrease from August’s peak.
At the state level, median rents were down in 60% of markets month over month. The largest decreases were mostly in the Northeast, including Connecticut (3%), Rhode Island (2% percent) and New York (2%).
Just over 16% of state markets were down year-over-year.
Where are rents going up?
While most of the significant yearly increases were concentrated in Southern and Midwestern states, New Hampshire saw the greatest growth with a 24% percent increase in prices. South Dakota wasn’t far behind registering 23% growth over the last year, according to Rent.com.
South Dakota (+23%)
Arkansas (+19%)
Florida (+18%)
Mississippi (+17%)
North Dakota (+15%)
Delaware (+14%)
Iowa (+14%)
Tennessee (+12%)
New York (+11%)
Where are rents going down?
Seven states saw year-over-year price declines in January. Three of these states — Idaho, Nevada and Colorado — were from the Mountain West. Rents in Idaho are in the fifth month of decline. Its 3% percent drop was the largest among all states.
Idaho (-3%)
Nevada (-2%)
Washington (-2%)
Minnesota (-1%)
Virginia (-1%)
Massachusetts (-1%)
Colorado (-0.3%)
Swapna Venugopal Ramaswamy is a housing and economy correspondent for USA TODAY. You can follow her on Twitter @SwapnaVenugopal and sign up for our Daily Money newsletter here.
