Does Rent Decrease with a Recession?
Rent is one of those painful expenses that eats up your paycheck every month... but does rent decrease with a recession?
Theoretically, if you're not getting any raises and the cost of necessities like utilities, groceries, and gas are all going up, your rent should go down. If the nation is in a recession and people start tightening their belts on spending, you'd think that landlords might take pity and charge a little less to offset that change.
While that'd be great in theory, that's not the capitalist way. Home prices fluctuate. But rent prices? Your landlord is experiencing the same squeeze, and they're probably going to respond to that by jacking up your rent.
The company ATTOM Data Solutions, a leading real estate data provider, doesn't have great numbers to share when it comes to rent prices during recessions. They track both housing markets and rental price averages in different regions. Recessions impact housing market interest rates, but they don't really impact rent very much.
So, does rent decrease with a recession at all? It honestly depends more on other factors, such as the area. Economic downturns might not help your rental budget as much as you're hoping they will.
Does a recession make rental prices better or worse?
In theory, if the market is on a downswing, you'd think that the rental market would be cheaper due to less demand. If you live in an area that's farther from major cities and has fewer job opportunities, you may see some decrease in rent, or at least a stabilization without annual increases.
Unfortunately, if you live closer to a major city, you might actually see rent go up. Those apartments within commuting range of a population hub will be in higher demand with people who are seeking work in an area where they're statistically more likely to find it.
However, The Atlantic asserts that because of the market crash a few years back, Wall Street is your landlord now. Investors realized the opportunity to become landlords or owners of corporations that own many, many apartment buildings; such as, Bozzuto, Morgan Properties, and many others. Real estate is almost always a safe investment, so it's no wonder renters end up paying the price.
Subsequently, while rent prices should theoretically go down substantially during a recession, they only inch down, if they move at all. The new owners of many of these complexes and management businesses are in it to profit. Economic downturns aren't good for the housing or rental market.
Some apartments have fixed prices while others have what they call "market pricing."
If they have market pricing, it's possible that the prices may go down when a recession hits. However, Apartment Ratings weighed in on the topic of how the recession affects apartment rental rates, and they report that regional tax costs, scarcity of apartment units, and availability of jobs in the area have the biggest impact on how much you pay in rent.
Marketing pricing can help, but it can also hurt you. Market pricing is partially based on the demand for apartments in the area. Thus, if you are in an area with higher demand, market pricing will kick you in the behind and drive prices up.
In my personal experiences, renting in both New Jersey and Maryland, there were a lot more complexes doing market pricing down in Maryland. There are definitely some that do it in New Jersey, but ask around in the state you're moving to or around in. Every complex is different, even if they're in the same town.
If a complex you're looking at does market pricing, don't be shy to ask them about how starting your lease on a different day, week, or month can change the rate you'll pay. It literally changes from day to day. They might fuss about giving you this information, but don't be afraid to push, they'll give in and tell you eventually.
You're more likely to get a deal at an apartment complex that isn't at capacity.
This is one of those renting lifehacks everyone should know. While rent prices may not go down quite as much as you'd like to see them drop, look for apartment buildings which are running rent specials. At these communities, if you sign a 13 or 14 month long lease, you can get one or two months rent for free.
If you're okay with making a commitment for a little over a year, you can really save yourself a lot in the long run. Think about it; let's say you're renting a one bedroom, one bathroom apartment with decent square footage for $1,500 per month. That's $18,000 total for 12 months. If you get one month free and stay there for 13 months, if you divide it out, you're technically only paying about $1,385 per month. The more you can save on a month's rent, the better.
It's a lot of numbers and sounds a bit confusing, but look for those free month rental specials. It actually really, really pays, and this kind of saving isn't solely dependent on economic downturns. The Great Recession is behind us, and while it's possible that we'll see another significant one, it may hit home prices, but rent prices will stay pretty stable.
Sometimes, newer complexes will be very eager to get at capacity but won't be there just yet. However, they also usually have more rules. Be careful to obey complex rules, avoid damaging flooring, and decorate your walls without destroying them.
If you're looking to save money, look very closely at the cost of living in the area you want to move to.
This applies most when moving from state to state, but it can also apply within a state. For example, central New Jersey rent prices are dramatically lower than northern New Jersey rental prices. If you're close to a city, you're going to pay more.
Generally, if you're not working in that city that's driving up median rental costs, it's not going to be worth it to live there. Moving in general is expensive, but look very closely at the cost of living in whatever region you're looking to move to. A new job might promise a raise, but if you have to live in a more expensive area, you might not have any extra money leftover anyway.
As you ask yourself, "Does rent decrease with a recession?" just know that there's a fair chance it won't. When you choose your next apartment, make sure it's one you can feel confident that you'll be able to afford for the entire duration of your lease. Whatever is happening in the world around you won't substantially impact your cost of living.
There are a lot of advantages to owning versus renting a home, but when you're renting, it's hard to save up for one. If you're renting and plan to for a while, keep your chin up, but be prepared for prices to stay stable.
I’m a creative writer, blogger, and IT person from Charm City, Maryland. If you’re not from around here, that means Baltimore. If you see someone in Fells Point pouring over a tiny Windows laptop that’s a bit too old, you might just have spotted me.