While home prices continue to rise in Chattanooga, renters have gotten a bit of a break in the average price of monthly leases over the past year, according to a new study by the rental rate service Zumper.
Apartment rental rates in Chattanooga have dropped an average of 5.4% in the past year, cutting the typical rate for a one-bedroom apartment in Chattanooga to $1,220 a month and trimming the average price for a two-bedroom apartment to $1,400 a month. Among the top 100 U.S. cities, Chattanooga had the 65th highest average rent, with that of a one-bedroom apartment in Chattanooga priced $306 below the U.S. average and the average two-bedroom apartment here priced $500 below the national average, Zumper said.
Nationally, Zumper said rental costs over the past 12 months rose an average of 1.5% for one-bedroom units and 1.9% for two-bedroom apartments, well below the overall inflation rate or the growth in average income in the past year.
"We may have finally returned to the first normal renting season since 2019," Zumper CEO Anthemos Georgiades said in the new Zumper National Rent Report. "Following a soft winter, last month our national index recorded the highest monthly gains since the fall of 2022 and rent growth has begun to accelerate into summer."
Zumper said Chattanooga's rental rates still remain well above their pre-pandemic levels. The price cuts in the past 12 months follow a couple of years of double-digit inflation in rental rates, according to the report released this week.
RISING HOME PRICES
While rental rates may have eased, home prices in Chattanooga have not dropped, according to the Greater Chattanooga Realtors' multiple listing service. In May, the median price of homes sold by Chattanooga Realtors reached an all-time high of $344,000 -- up 6.5% from a year earlier and more than double the median price of homes sold only seven years ago in Chattanooga.
Kadi Brown, president of the Greater Chattanooga Realtors association, said demand for housing has remained strong in Chattanooga even as the Federal Reserve Board has tightened monetary policy and boosted borrowing rates for homebuyers.
"This robust performance highlights this area's resilience and attractiveness, even as broader national trends show a slight cooling in existing home sales due to higher interest rates and escalating prices," said Brown, co-owner and a broker at The Group who has worked as a real estate agent for more than 15 years.
The inventory of homes for sale and apartments for rent has increased as builders have tried to keep pace with the higher demand for housing in Chattanooga.
RENTAL INVENTORY GROWS
The commercial real estate firm CoStar said in a recent report that "the Chattanooga multifamily market has been softening recently" as inventory levels have grown. But CoStar said the softer rental market in Chattanooga "is not due to a lack of demand."
At the end of the first quarter of 2024, CoStar said demand for apartments had tripled year over year.
"Yet, with the arrival of just over 1,400 units in the trailing four quarters, vacancies aligned with historical norms for the first time in three years," CoStar said.
Over the past four quarters, asking rents in Chattanooga declined in the CoStar study by about 0.2% from a year earlier.
"That was a significant change of pace compared to 2021's never-before-seen growth rates, which peaked at 11.7%," CoStar said.
While higher borrowing costs have limited new development in many other parts of the country, Chattanooga is still seeing an influx of development with an estimated 2,200 more apartment units under development or construction, CoStar said.