Due to the massive supply, apartment rents are on the verge of falling

Rental prices for apartments are approaching negative territory

Apartment rents have been falling sharply for several months and it looks like they will soon fall into negative territory compared to last year.

According to the real estate technology platform, rents in August were only 0.28% higher than in August 2022 RealPage. Compare that to last year, when rents saw 11% annual growth. With the exception of a very brief dip during the coronavirus lockdowns, rents have not seen negative annual growth in well over a decade. When it did, it was because a recession hurt demand.

That is not the case now. Apartment occupancy is at a reasonably good 94% nationwide, which is right in line with historical norms. High mortgage rates combined with high property prices and tight supply have kept more potential buyers in the rental market. Rather, it is simply a matter of an enormous supply of housing.

The number of new units being built is at its highest level in 50 years, with more than 460,000 units completed this year alone. Over a million new units have been built in the last three years. That’s a record, and much of the supply is at the higher end. Tenants have more options, so landlords have less pricing power as sales increase.

While rents have not yet turned negative nationwide, they have in several local markets. Austin, Texas (-4.9%), Phoenix (-4.9%), Las Vegas (4.7%), Atlanta (-3.7%) and Jacksonville, Florida (-3.4%) record the biggest declines.

The Midwest and Northeast regions continue to see very strong rent increases. The exception is New York, where rents have risen just 1.9% annually as significant supply entered the market.

Looking ahead, supply is likely to remain high into next year, potentially driving rents down into 2025. However, new construction has fallen sharply this year due to financing and other challenges, so supply is expected to be far lower by 2026, giving rents a chance to make up some ground.

https://www.cnbc.com/2023/09/08/apartment-rents-on-verge-of-declining-due-to-massive-supply.html Due to the massive supply, apartment rents are on the verge of falling

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