Rents Continue to Decline in Most Major Cities
The national median rent today is $10 per month cheaper than it was one year ago,
Four out of five of the nation’s 100 largest cities experienced month-over-month rent drops in September and the outlook for the future is more of the same, a new report from Apartment List predicts.
“We are likely to see continued price dips of increasing magnitude in the coming months, as property owners offer modest discounts to fill vacancies during a time of year when few renters are looking to move,” the report stated.
It found that year-over-year rent growth nationally has fallen to -0.7% — the 18th month it has been in negative territory. Median rent in September dipped 0.5% to $1,405. “The national median rent today is $10 per month cheaper than it was one year ago,” the report noted. Even so, it is 20% higher than it was in early 2021.
Other factors affecting the market are slumps in rent prices that are normal in fall and winter which have been steeper than usual, and the usual rent boosts in spring and summer have been weaker.
The well-documented problem of too many apartments coming on the market at this time has helped raise the national vacancy index to 6.7%, the highest since August 2020. Sun Belt metros like Austin, Raleigh, Jacksonville, Orlando, Phoenix and San Antonio are among the worst affected. The report predicted that supply would continue to outstrip demand into 2025.
However, markets in the Midwest and Northeast that have not seen an influx of new supply continue to see rent growth.
The report noted that the federal Consumer Price Index (CPI) is heavily influenced by changes in housing prices. Yet even though the cost of rent has been declining, shelter CPI remains elevated and contributes significantly to upward pressure on topline CPI.
“If you strip out shelter, the remainder of the CPI price basket increased by just 1.1% year-over-year, well below the Fed’s long-term 2% inflation target,” the report stated. Noting the Fed’s recent action to cut rates, the report said the Fed’s action indicated that elevated shelter CPI is no longer a blocker to rate cuts.
“As shelter inflation continues to trend down, it will help overall inflation continue to ease as well, but it will still take time for shelter CPI to fully metabolize the shock to market rents,” the report cautioned.