Apartment Rents Dropped Again in December

ApartmentList’s national rent index dropped by 0.8 percent in December, in the fourth straight month-over-month decline for the sector — and the rest of the year is on track to be similarly tepid.

“The timing of this cooldown in the rental market is consistent with the typical seasonal trend, but its magnitude has been notably sharper than what we’ve seen in the past,” Apartment List’s research team notes in a new report. “This suggests that the recent swing to falling rents is reflective of a broader shift in market conditions beyond seasonality alone. As we look ahead to the new year, we expect that 2023 will see bargaining power shift back to renters, and that rent prices this year will grow only modestly, if at all.”

Nationally, median apartment rents increased by 3.8 percent over the course of last year, making 2022 the second fastest year in the history of Apartment List’s estimates going back to 2017. But the metric came in “just barely ahead” of the 3.5% rate observed in 2018.

Rents declined in 90 of the nation’s 100 largest cities in December, led by New York City with a 3 percent month-over-month dip and an ongoing cool down being observed in Sun Belt boom towns like Las Vegas, Phoenix, Jacksonville, and Riverside, none of which have seen rent increases of more than 1 percent over the past twelve months.

On the flip side, “Indianapolis has seen the nation’s fastest metro-level rent growth over the past 12 months, with prices there up by 7.4 percent year-over-year. In addition to Indianapolis, five other Midwestern metros – Kansas City, Chicago, Columbus, Cincinnati, and St. Louis – rank among the top 10 for fastest annual rent growth,” the report states. “With many previously affordable Sun Belt markets having seen rents spike by 30 percent or more over the past two and a half years, markets in the Midwest may now represent some of the last bastions of affordability, and could therefore be drawing new attention.”

Supply is also easing, with Apartment List’s vacancy index clocking in at 5.9 percent, up from a low of 4.1% last fall.

“After more than a year of gradual increases from a low of 4.1 percent last fall. And in the past four months, this easing of the vacancy rate has picked up steam again, after plateauing a bit over the course of last summer. Today’s vacancy rate still remains slightly below the pre-pandemic norm, but is quickly approaching that benchmark,” the report notes.