After Heavy Rent Cuts in October, Operators Can Look to Spring Leasing Season

After reporting the third-largest monthly rent cuts since 2010, RealPage posed some “what-ifs” about the spring when the next leasing season traditionally begins.

“If the job market remains strong, pent-up demand for housing should be unlocked in spring 2023 – but that’s admittedly a big if,” Jay Parsons VP, Head of Economics & Industry Principals title, RealPage, said in a release.

“With the U.S. on track for record apartment completions in 2023, demand numbers will be closely watched. The sheer volume of lease-ups suggests there will be some relative bargains for Class A+ lease-ups in 2023, though that segment will mostly benefit upper-income renters.

Reductions ‘Notable – Even if Not Terribly Surprising’

Same-store effective asking rents for market-rate apartments dropped 0.6% last month.

October represented the second straight month of cooling, based on weak demand, RealPage reported, as household formations have “nearly stopped.”

That cut ranked as the third largest since 2010, topped only by the COVID-era lockdown period of April and May 2020.

“Cuts are seasonally common in September and October, but 2022’s reductions are notable – even if not terribly surprising – for a couple reasons. First, normal seasonal patterns have been obscured since COVID hit in 2020,” Parsons said.

On a year-over-year basis, effective asking rent growth measured 7.6% as of October – which might prove to be the first time since early 2021 that asking rent growth fell short of headline inflation, the company reported.

Perhaps ‘Deeper-Than-Usual’ Reductions in Winter

Parsons said to look for rent cuts “to continue through the winter as seasonal slowness returns following two straight years of abnormally strong winter demand.

“It wouldn’t be surprising to see deeper-than usual rent reductions this winter, giving back some of the big gains from the past two years.”