At $2,052, the median monthly rent remains near its all-time high. But builders are wrapping up construction on thousands of new units, and rents could start falling soon.
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Rent has remained stubbornly high after soaring to new record-high prices in the wake of the COVID-19 pandemic, but there are signs that things are starting to tip in renters’ favor.
Median monthly rent between houses, apartments and townhouses listed on Redfin and Rent. was $2,052, Redfin reported on Tuesday. That’s down $2 from the record set last year, Redfin said, and up 0.7 percent from a month earlier.
Concessions are on the rise as landlords and property managers face more competition to attract and retain renters who now have more options to choose from.
“A year ago, you really didn’t see concessions in the market. Fast forward to today, and they are far more common, with landlords offering from one to three months free in an effort to attract new tenants without lowering their asking rents,” said Jon Ziglar, CEO of Rent., which is owned by Redfin.
Redfin’s new report was the latest in a series that showed the price of rent falling back toward historically healthy levels after unprecedented growth during the pandemic.
The pressure is particularly centered on high-end units, as much of the new construction has been class A apartments. That competition is trickling down to lower-priced rentals, which are in shorter supply and therefore higher demand, Ziglar said.
“We are still seeing a lot of competition for more affordable units due to less new supply, as well as increased pressure on consumer wallets limiting the ability to stretch for that higher level experience,” Ziglar said.
The scenario has led building owners to hold off on raising prices for existing renters who renew their leases.
Jay Parsons, chief economist at the rental data firm RealPage, said the changes in rent growth come down to supply and demand.
“Rents are flattening in 2023 because the huge volume of new supply hitting the market is giving renters a lot more options — leading to more turnover among deal-shopping renters,” Parsons said in a report last week. “In turn, operators are giving on price to compete for renters and to protect occupancy and cash flow.”
Parsons noted that demand for apartments remained strong and largely kept up with construction that reached 40-year highs.
The national vacancy rate rose from 5.6 percent last year to 6.3 percent this year, near a two-year high, Redfin reported. Parsons called that “roughly in line with long-term norms.”
With more apartment projects under construction and set to wrap up over the next year, Parsons said that points to downward pressure on rent until 2025. But investors have rapidly slowed down new construction this year, so supply should dry up and push rents higher in 2025 and 2026.
Redfin’s report didn’t specify individual markets, though it noted that rent is cooling fastest in the West. Rent in western states is now 1.1 percent lower than it was in August.
Rent grew fastest (4.6 percent) in the Midwest, followed by the Northeast (1.2 percent).
RealPage noted that rent was lower this August than last in 24 of the nation’s 50 largest markets, and it reported that rent was falling fastest in markets where it grew fastest between late 2020 and early 2022.
Rent is growing fastest in northern New Jersey (4.7 percent), followed by Cincinnati, Boston, Chicago, Cleveland and Milwaukee, where it grew between 3 percent and 4 percent.
Biggest year-over-year cuts in rent, Aug. 2023
- Austin, Texas: –4.9 percent
- Phoenix: –4.9 percent
- Las Vegas: –4.7 percent
- Atlanta: –3.7 percent
- Jacksonville: –3.4 percent
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