These Cities Posted the Sharpest Drop in Apartment Rents

Rents continued their downward slide in March for the eighth successive month, though the drop was relatively small and the median remained higher than it was in the peak month of August 2022.

Year-over-year prices fell by -0.3% and every size of unit was affected. “Even so, the median rent of $1,722 was only $36 less than the peak seen in August 2022 and was $313 more than in March 2019, before the pandemic, pointing to a resilient rental market,” according to a new report from Realtor.com.

The sharpest annual drops occurred in the Austin, Memphis, St. Louis, Atlanta, Miami, Phoenix, Nashville, Orlando, Tampa, and Cleveland metros. The declines ranged from 4.7% in Austin to 2.5% in Cleveland. They offer some good news for renters in many areas at a time when the Fed is worried about the rising cost of shelter as a component of inflation. Benefits are most likely to be felt outside expensive metro markets in the West and Northeast, the report noted. However, it warned of continuing cost pressures as interest rates remain high, and potential homebuyers opt to continue renting.

“New housing construction is needed, especially in major markets in the Northeast and West, to alleviate the home supply shortage. Softer rents in the South are evidence that more supply helps tame rising costs.”

By region, March rents in the Midwest were flat and apartments remain more affordable – but are at risk of declines as unemployment in the region rises. Chicago (4.3%), Kansas City, MO (3.4%) and Indianapolis (3.3%) saw strong growth, though the median rent in Chicago was still $1,000 lower than in New York or Los Angeles.

In contrast, the South – even with low unemployment and high demand for apartments –experienced a 1.5% fall in median rent compared to the prior year, the result of an inflow of new supply.

Landlords in the West had something to smile about as the region emerged from 13 straight months of falling rents to achieve an annual increase of 0.4%. High home prices, dwindling hope of lower mortgage rates, and the fear of rising unemployment discouraged home buying and helped push rents up, especially in expensive markets like San Diego (up 2.9%) and Los Angeles (1.6%). “If labor market conditions deteriorate, more people may leave the area entirely,” the report commented. Some metros in the West like Phoenix (-3.2%) and Denver (-1.9%) did see rents decline.

On the other hand, expensive Northeastern metros were on a tear. Median rents climbed 3.8% in New York and 3.3% in Boston. The region enjoys relatively robust labor markets and more demand for rental housing than there is supply.

Median rent nationally declined in March for all types of units on an annual basis – but still remained higher than five years before. Median studio rents were worst affected, dropping 1.4% to $1,435 from the previous year –17.6% higher than five years ago. One-bedroom units slipped by just 0.1% to $1,602 (up 22%) and two-bedroom units by 0.5% to $1,908 for the eighth consecutive month. Even so, “these units still had the highest growth rate over the past five years, up by $372 (24.2%),” the report noted.