Rent Growth Hits 2.7%, Fastest Since April, as Home Values Stay Flat

Rents are climbing again even as the for-sale market freezes. The typical U.S. rent rose 2.7% in September from a year earlier to $1,932, the biggest annual gain since April 2025, according to the Zillow Observed Rent Index. That acceleration is running head-on into the flatline on the ownership side, where home values have gone nowhere while the cost of the monthly payment keeps climbing.

The September snapshot from Zillow's economists, published October 6 and refreshed this week, reads like two different markets. On the for-sale side, sales are cooling as mortgage rates sit near 7.3%. Existing home sales fell 2.5% from a year earlier to 319,346 in September, according to Zillow's preliminary nowcast. Newly pending sales, the leading indicator of what closes in coming months, tumbled 8.5% year over year and 11.2% from August.

Related reading: Zillow: Monthly Mortgage Payment Up 6.7% as Pending Sales Fall 8.5%.

The rate backdrop explains most of it. Mortgage rates ended September at 7.28%, the highest reading since November 2023, per Freddie Mac data, and Zillow's latest forecast calls for continued declines in home sales through the rest of the year. The monthly mortgage payment on a typical home hit $1,922, assuming a 20% down payment and excluding taxes and insurance. That is 6.7% higher than a year ago.

Here is the split that matters for affordability. Home values rose just 1% over the past year by the Zillow Home Value Index, which now puts the typical U.S. home at $366,913, down 0.5% from August. Yet the cost of buying that home climbed far faster. When the price barely moves but rates run at nine-year highs, the real affordability pressure lands on the payment, not the sticker.

Related reading: New Home Sales Reach 684,000 as Supply Falls in August.

A household at the median income would now need to spend 34.3% of its income on the typical monthly mortgage payment, up from 33.7% a year earlier and 33.9% in August, Zillow calculates. That figure includes estimates for taxes, maintenance and insurance. On the rent side the same household needs 26.3% of income, down slightly from 26.4% a year ago and flat from August.

The rental strength is the surprise in this report. Annual rent growth has accelerated every month since April and is broad-based, rising for both multifamily and single-family homes. The concession rate tells the same story: 39.6% of rental listings offered a concession in September, up from 37.4% a year earlier, but that has not been enough to keep asking rents from climbing.

Related reading: Home Affordability Index Slips to 105.4 as Inventory Builds.

The absence of buyers has not pulled home values down much because sellers pulled back too. New for-sale listings totaled 343,311 in September, up just 0.4% from a year earlier and 11.9% below the pre-pandemic baseline. Most sellers buy another home, so the same forces keeping first-time buyers on the sidelines are also keeping a lid on inventory. Total for-sale inventory was 1.39 million homes, up 2.5% year over year for the 34th consecutive month of annual gains, but still 16.1% below pre-pandemic norms.

Competition is loosening at the margins. Homes took a median 29 days to go pending in September, two days longer than a year earlier and two days longer than August. The share of listings with a price cut ticked up to 27.4%, from 26.2% a year earlier. In August, the most recent data available, 27.6% of homes sold above list price, down from 29.6% in July, a sign that bidding intensity is fading.

Related reading: Home Prices Are Outpacing a 7% Mortgage Rate, and That Math Cannot Hold.

The path forward depends almost entirely on where rates go next. Zillow's forecast has sales grinding lower into year-end, and the affordability math explains why: a payment 6.7% higher on a home value that barely moved is the market's own arithmetic on how much debt a buyer can absorb at these rates. The next check is the Zillow October Market Report, expected November 5, and the housing starts print due from the Census Bureau later this month, which will show whether builders are responding to the same demand freeze.

The uncomfortable takeaway for anyone trying to time the market: renting has quietly reverted to the cheaper path for a median household, spending 26.3% of income versus 34.3% to own. That is the widest gap in years, and it is the direct product of a 7.3% mortgage rate. Until that number falls, expect rents and flat prices to keep telling the same story.

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