Rental Market Downward Slide
The Rental Market's Downward Slide: 5 Straight Months of Falling Rents
Rents continued to fall around the country as more rental units hit the market.
September marked the fifth month in a row of year-over-year rent declines, with prices decreasing 0.7 %, according to a recent Realtor.com® report. The median asking rent dropped to $1,747 in September. That was a $5 dip from August 2023 and a $29 decrease from July 2022, when rental prices peaked.
Renters are still paying more than pre-pandemic times, however. September 2023 rents were $338—a whopping 24%—higher than September 2019.
The report looked at rents for studios and one-bedroom and two-bedroom apartments, condos, townhomes, and single-family homes in the 50 largest metros. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.)
The recent rent declines are a welcome trend for renters, says Realtor.com® senior economist Jiayi Xu.
“In today’s market, we are seeing high home prices and record mortgage rates,” she says. “Declining rent means buying is not as urgent and renting is more favorable.”
Fresh competition is fueling the rent decreases. The annual completion of new apartment buildings is at a near record high—and units are renting fast. More than 82,000 apartments in buildings with five or more units were completed in the first quarter of 2023, according to the Survey of Market Absorption of New Family Unit.
Going forward, Xu predicts rents will continue to fall as long as there is a healthy supply of rentals. Even those who live in areas where rents are rising can take comfort in the fact that a repeat of the over-the-top rent increases of the past two years isn’t likely.
Where are rents falling the most?
In September, rents fell the most in the pandemic boomtown of Austin, TX, dipping 7.3% year over year. For-sale and rental prices spiked in the metropolitan area and have since corrected.
The metro was followed by Dallas, at -6.2%; Portland, OR, and Orlando, FL, both at -5.4 %; and Atlanta, at -4.9%.
Brad Pauly, a real estate broker with Pauly Presley Realty in Austin, attributes the lower rates to an oversupply of units.
“There is more inventory on the market than there would typically be,” he says.
Another factor is fewer people are moving to Austin in recent years, he adds.
Then there’s the Airbnb wild card, says Pauly. The company significantly dropped its rental fees, leading some customers to rent out their properties for the long term.
Where are rents still rising?
Rents are not falling across the board, though. The relative affordability of the Midwest compared with the rest of the country might be attracting more renters, says Xu. That extra competition might be pushing rents up.
In Louisville, KY, and Richmond, VA, for example, the year-over-year rent increased 4.6 %, to a median of $1,199 a month in September.
Rents are also increasing in New York City, 4.5%; Birmingham, AL, 4.4%; and Washington, DC, 4.2%. This might be partly due to changes in work-from-home policies, resulting in employees returning to big cities, says Xu.