US Asking Rent Posts Biggest Jump in Nearly a Year But Larger Trends Persist

The median U.S. asking rent rose 1.1% year over year to $1,964 in January, the largest annual increase since March 2023, according to Redfin. However it was unchanged from a month earlier and given all indications it does not appear likely to rise any time soon.

The pandemic moving frenzy is over and landlords are grappling with vacancies due to a jump in apartment supply. Demand should remain solid, however, because buying a home is not gaining traction in this economic environment, the online brokerage said, keeping renting as a lifestyle choice alive and well.

“There’s not a huge incentive for renters to buy right now,” Redfin Chief Economist Daryl Fairweather said in prepared remarks. “Asking rents are stable, and while mortgage rates have dipped in recent months, they haven’t fallen enough to make the financial equation of homebuying feasible for many people.

“If you’re a renter who’s interested in buying but isn’t in a rush, there’s not much downside to waiting for mortgage rates to fall and your savings to grow.”

Meanwhile, home prices are rising much faster than rents.

During the pandemic, rent growth was regularly measured in double-digits, but now, it’s stuck in a narrow range of range between -2.1% and +2.4% for the past year.

Because of the building boom, vacancy rates touched 6.6% in the fourth quarter, which is tied with the prior quarter for the highest level since early 2021. Apartment completions is near its highest level in more than 30 years, and the number under construction is just shy of its record high.

Fairweather said he expects apartment completions to peak in 2024.

While rents have cooled, they have not yet posted significant declines, Redfin said.

“That’s likely because high mortgage rates continue to fuel rental demand, and because some landlords are offering one-time concessions like a free month’s rent or reduced parking costs to attract renters without having to lower asking rents on paper,” according to the report.

It’s in the Midwest where the median asking rent is performing well. There, it increased 4.6% year over year to a record $1,437 in January. Rents also rose in the Northeast (2.3% to $2,427) and the West (0.6% to $2,358). In the South, rents were unchanged at $1,637. The Midwest was the only region where rents hit a record high.

Redfin said the Midwest’s strong performance should continue those regions haven’t been building as much as the South and West, meaning landlords aren’t under as much pressure to fill openings.