Stable Rents, Higher Wages Improving Apartment Affordability

Apartment rents have experienced the largest annual increase in 18 months for August, rising 0.9% year-over-year to $1,645, according to a Redfin report. Month-over-month, asking rents were up 0.1%. However, they are still below their all-time high of $1,700 two years ago, according to a Redfin report.

Multifamily supply outweighs demand in some areas as building completions are at a historic high this year, which is spurring some building owners to reduce rents and offer concessions. Lower rents paired with wage growth of 3.8% year-over-year in August suggests that rental affordability has improved, said Redfin. 

The median asking rent for a two-bedroom apartment was unchanged from the same a month a year ago at $1,725, while asking rents for 0-1 bedroom apartments ticked up by 0.1% year-over-year to $1,495 and fell 1.7% to $2,008 on apartments with three or more bedrooms, the report found. Meanwhile, the median home sale price was up 7.3% to $439,000 in July from $409,000 two years ago.

“Almost everything in our lives costs more than it did two years ago — but rents have remained largely stable thanks to the construction boom, especially across the Sun Belt states,” said Redfin senior economist Sheharyar Bokhari. “We are seeing rents tick up a little now that new construction is starting to slow down, but asking rents are likely to stay relatively flat for some time due to the backlog of new apartments that are still coming onto the market,” he added. 

The trend of increased construction leading to lower rents is most obvious in Austin, Texas, where the median ask fell 17.6% year-over-year in August — the steepest decline of the 33 major metros Redfin analyzed. In dollar terms, that means rents in Austin are $317 a month less now than they were a year ago. San Diego and Jacksonville also saw rents fall by double digits in August. Plus, San Francisco and Tampa rounded out the five metro areas with the largest rent decreases for the month.

On the other end, rents in Virginia Beach rose 15.2% year-over-year in August, the most of any of the metros Redfin studied. Washington, D.C., Baltimore, Chicago and Cincinnati rounded out the list of markets where rents increased the most.