Sun Belt Apartment Rents Continue to Cool

Rents are cooling, but nowhere more greatly than in the Sunbelt markets, according to today’s Realtor.com’s November Rental Report, along with other analysts.

“Rent increases have far exceeded normal growth patterns for nearly two years,” Doug Ressler, business manager, Yardi Matrix, said. “The slowdown is in line with our forecasts going into the year.”

The weakening of demand can be seen in declining occupancy rates, Ressler said.

“Nationally, the average occupancy rate for stabilized properties was 95.6% in October, down 60 basis points year-over-year.

However, the occupancy rate has fallen by 1% or more over the last year in nearly half of the top 30 metros, with the biggest declines in three Sunbelt markets of Las Vegas (-2.5% to 93.6%), Tampa (-1.9% to 94.8%) and Phoenix (-1.9% to 94.1%).”

Markerr multifamily rent data tor Q4 to date shows Sunbelt markets’ rent growth decelerating by 1,150 bps to 5.2% YoY growth, falling from the peak of 16.7% YoY rent growth seen in March 2022, Brian Lichtenberger, CEO, Markerr, tells GlobeSt.com.

Falling Rents Not a Sign of ‘Deep Recession’

Ressler said that the deterioration in rents was not unexpected nor is it necessarily a sign of a deep recession.

Among the 50 largest metros in November, Realtor.com reported that Riverside, Calif. experienced the most significant rental cooldown, dropping 5.5%.

Rents, however, kept surging in some big tech cities and parts of the Midwest, led by Chicago, Realtor.com said. Overall, the U.S. median asking rent ($1,712) grew at its slowest year-over-year pace (+3.4%) in 19 months in November, further pulling back from its July peak (-$69).

Trends Shifting from Pandemic’s Hot Markets

Realtor.com senior economist George Ratiu tells GlobeSt.com that the rental market is showing welcome signs of shifting toward more balance after a year-and-a-half of pandemic activity which saw Americans flee big-city downtowns to seek the safety and affordability of suburbs and mid-sized cities.

“Rents across the country—which reached $1,734 in October—saw the ninth month of slowing growth, and the third consecutive month of single-digit gains,” he said.

“While vacancies remain low and landlords continue to enjoy a stronger position, trends are shifting away from the pandemic’s hot markets, as a seasonal cooling—in the fall and winter months fewer people choose to move—and the normalization of hybrid employment return the spotlight on larger cities.”

In October, rent growth was strongest in large metros such as Chicago, Boston, New York and San-Jose, “boosted by the reality that the pandemic’s impact is mostly over and young professionals are again seeking urban employment and lifestyles,” according to Ratiu.