As home sales inventory increases, have rents started falling?

Data from Rent.com from this month shows some rents are coming down. But there’s no evidence that the decrease is related to increased inventory in the sales market.

Earlier this year, we did a deep dive on rent prices in the Coachella Valley. At the time, data showed average monthly rent in one city, Palm Springs, had doubled in the past seven years and crossed the $2,000 mark for the first time at the start of 2022.

Part of what was fueling the higher rents in the valley was the lack of inventory, experts told us. So it might follow that as more houses are available for sale, more might be available for rent.

  • We reported this week that more homes were for sale in the valley now, and a reader asked whether that might lead to lower rents.

  • The answer is a resounding “maybe.”

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State of play: Data from Rent.com from this month shows some rents are coming down. But there’s no evidence that the decrease is related to increased inventory in the sales market. For example:

  • One-bedroom units in Palm Springs peaked at an average monthly cost of exactly $2,000 in May but are now averaging $1,792. That’s approaching the $1,600 mark they were at for several months before the pandemic.

  • Two-bedroom units in that city peaked at an average monthly cost of $2,260 in May but are now averaging $2,170. Unfortunately, that’s still about $300 more a month than where rents were for those units before the pandemic.

Bottom line: Rents for coveted one- and two-bedroom units in Palm Springs are 17% higher than a year ago, but that’s still less than the sticker shock experienced in other Coachella Valley communities.

  • In both Palm Desert and La Quinta, the price for a two-bedroom unit increased roughly 30% year-over-year.

  • In Cathedral City and Indio, rents for one-bedroom units increased an average of 28% compared to last year.

FYI: If you’re looking to move out of the Coachella Valley, you might want to avoid New York City. The average monthly rent in July was a migraine-inducing $5,812 — a 41% increase from the previous year. 🤯

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