Apartment rents have been cooling off sharply for several months, and they appear like they’re about to go negative compared with a yr ago.
Rents in August were just 0.28% higher than August 2022, based on real estate tech platform RealPage. Compare that to a yr ago, when rents were posting 11% annual growth. Aside from a really temporary drop through the Covid lockdowns, rents haven’t shown negative annual growth in well over a decade. After they did, it was as a consequence of a recession hitting demand.
That isn’t the case now. Apartment occupancies nationally are at a fairly healthy 94%, which is true along historical norms. High mortgage rates combined with high home prices and tight supply have kept more would-be buyers within the rental market. The problem as an alternative is just an enormous amount of apartment supply.
The number of latest units being built is at a 50-year high, with greater than 460,000 being accomplished this yr alone. Over 1,000,000 latest units have been built up to now three years. That is a record, and far of that offer is on the upper end. Renters have more options, so landlords have less pricing power as turnover increases.
While rents nationally have not gone negative yet, they’ve in several local markets. Austin, Texas (-4.9%), Phoenix (-4.9%), Las Vegas (4.7%), Atlanta (-3.7%) and Jacksonville, Florida (-3.4%) are seeing the largest drops.
The Midwest and Northeast regions proceed to see very strong rent increases. One exception is Recent York, where rents were up just 1.9% annually as significant supply comes available on the market.
Looking ahead, supply should remain high through next yr, which is able to push rents lower potentially through 2025. Recent construction, nonetheless, has dropped sharply this yr due to financing and other challenges, so there must be far less supply going into 2026, giving rents a probability to make up some ground.
