Apartments Rents are Now 1.2% Cheaper Than a Year Ago

Remember those escalating apartment rent numbers, some skyrocketing 40% in very popular cities? They’re now in your rear-view mirror, as rent growth has dropped. The nationwide median rent fell 0.5% to $1,364, according to Apartment List’s National Rent report. Annual rent growth is now at -1.2%, which translates to apartments being 1.2% less expensive now than they were a year ago. In recent years, the growth sometimes neared 18%, though it also climbed higher in selective markets.

The drop isn’t just isolated but nationwide with rents falling month-over-month this month in 85 of the nation’s 100 largest cities. Furthermore, prices are down year-over-year in 71 of those 100 markets. The prior rent surges were fueled by a huge shortage of available apartments in the years 2021 and 2022, with growth hitting a record 17.8% in 2021.

But now the scenario is the opposite, and a surging number of apartments coming online will make more vacancies available in coming months.  Early in the pandemic, vacancies rose as many hunkered down with family members due to job losses and the desire to shelter together as well as economic uncertainty. Then, the tight rental market fueled growth in both 2021 and 2022 as more renters competed for fewer vacant units. That’s when the vacancy index shrank from 6.8% to 3.9% in a year. And now that the vacancy index has eased for almost two years, vacancies have increased for 23 months, hitting 6.4% in September.

Seasonality also comes into play as rent growth prices generally rise during spring and summer and head down in fall and winter with September being the first month to show declines. This year the slowdown started a month early with a 0.1% drop in August, followed by the 0.5% fall this month and making it the steepest September rent drop charted by the National Rent Index. Looking back a bit, national rent growth fell to zero in June for the first time since the beginning of the pandemic.

Vacancy trends are also localized. The first cities to see negative growth were what has been called the early “zoom towns” in states like Arizona, Nevada and Idaho in 2020 when many workers began remote work in affordable locations. But then there was a pullback in demand as affordable rental options lessened and more went back to work, even in hybrid situations. Other states and areas joined the trend including California and the West Coast, Texas and the Southeast. The sharpest YoY decline is found now in Oakland, Calif., where prices are down 7.2% compared to last September. And YoY rent declines are common in Sun Belt metros, with Austin is at the top since its prices are down 6% over the last 12 months. Other Sun Belt metros falling into this category include Phoenix, Los Vegas, Atlanta and Orlando, which had rent drops of 4%. Jacksonville and Raleigh also posted declines of 3%.

But not everywhere is rent growth dropping. The fastest pace has been in the Midwest and New England, such as Chicago, Boston and New York. But the growth is now more modest compared to what it had been in the last year. Renters have also moved for lower lease payments. Example is Providence, which has become popular for those moving from more expensive markets. The fastest rent growth is still concentrated in the Sun Belt as some cool. Miami metro is the only one registering three-year-rent growth over 40% and Tucson, Tampa, Orlando and San Diego all exceeded 32%. North Carolina also experienced rental demand.

The expectation is that monthly rent growth will continue to slow for the rest of the year and keep annual rent growth down for several more months.