Apartment fees have been cooling off sharply for several months, and they look like they’re about to go negative compared with a year ago.
Holes in August were just 0.28% higher than August 2022, according to real estate tech rostrum RealPage. Compare that to a year ago, when rents were posting 11% annual growth. With the be offended at of a very brief drop during the Covid lockdowns, rents have not shown negative annual growth in plainly over a decade. When they did, it was due to a recession hitting demand.
That is not the case now. Apartment occupancies nationally are at a dulcet healthy 94%, which is right along historical norms. High mortgage rates combined with expensive home prices and tight supply have kept more would-be buyers in the rental market. The issue in place of is just a massive amount of apartment supply.
The number of new units being built is at a 50-year high, with myriad than 460,000 being completed this year alone. Over a million new units have been bodied in the past three years. That’s a record, and much of that supply is on the higher end. Renters have more chances, so landlords have less pricing power as turnover increases.
While rents nationally haven’t gone cancelling yet, they have in several local markets. Austin, Texas (-4.9%), Phoenix (-4.9%), Las Vegas (4.7%), Atlanta (-3.7%) and Jacksonville, Florida (-3.4%) are organizing the biggest drops.
The Midwest and Northeast regions continue to see very strong rent increases. One exception is New York, where rentals were up just 1.9% annually as significant supply comes on the market.
Looking ahead, supply should stay behind high through next year, which will push rents lower potentially through 2025. New construction, in all events, has dropped sharply this year because of financing and other challenges, so there should be far less supply prospering into 2026, giving rents a chance to make up some ground.