Apartment Rents Do an Accordion Fold in March

You know the accordion fold: front and back with some strips leaning one way and others the opposite. That’s what multifamily rents are doing right now: up month over month, down year over year, with the assumption that the longer decent will win out over short-term optimism.

Apartment List’s rent report for March starts with a national view in which their indexed metric for rent dropped 0.5% from February to March. That is the second month-over-month increase and is higher than the February-over-January one.

“This month’s increase is of a similar magnitude to the typical March price change that we saw in pre-pandemic years,” the report said. “After 2022 closed out with record-setting price declines, it appears that rental demand is rebounding in line with the usual seasonal trend.”

But then there’s the Lady of Spain’s flip side: the year-over-year changes. “Year-over-year rent growth is continuing to decelerate, and now stands at 2.6 percent, its lowest level since April 2021,” the company said. “Year-over-year growth is now pacing slightly below the average rate from 2018 to 2019 (2.8 percent), and is likely to decline even further in the months ahead.”

One factor that is likely at work is supply side easing. Apartment List’s vacancy index stands at 6.6%, which is about par for pre-pandemic norms. Consider the addition of units under construction and the company says, “2023 could be the first time since the early stages of the pandemic that we see property owners competing for renters, rather than the other way around.”

So far this has been about averages. Rents did increase month over month in 78 of the 100 largest metro areas. Last month it was 62 of the largest cities. Looking at annual changes, 28 of the top 100 cities are seeing negative growth, while last month it was 25.

There are some things to remember about the Apartment List index. One is that it is of market rents, which is to say rents paid by new tenants that might be higher than rents paid by existing tenants, something the company explicitly points to. Another, which might be impossible to assess, is that advertised rates might not be what even new tenants actually pay.

Ben Phillips, an associate professor at Australian National University, noted that in Australia—and the logic holds for the US—advertised rents are a small fraction of those paid. Beyond ongoing rentals, an advertised rent doesn’t necessarily mean what a tenant pays, because there is some amount of negotiation that can happen, and not all properties get advertised.