Asking rents are on the decline year-over-year (YoY) and month-to-month. New data from Redfin shows asking rents slipped 0.6% from October to November, and rents were down 2.1% since the previous November, which is the largest decline since February 2020. Despite the declines, rents are still 22.1% higher than in November 2019 and 4.2% below the peak in August 2022.
The Midwest was the only region to see asking rents increase at 4.6% YoY. Rents dropped 1.8% in the West, 0.4% in the South and remained unchanged in the Northeast, according to Redfin.
"The trajectory of rents is dependent less on the overall economy than on supply-demand fundamentals in a given submarket," says Jay Remillard, Managing Director at CP Capital US. "Focusing specifically on Class A properties (the story is somewhat different in B and C properties), where wage growth for our residents remains strong, rent increases will largely depend on the amount of supply in a given area versus how many new households are being created.
"In submarkets where there are more new units than there are new households formed, rents could be flat. If those figures are reversed, then there is certainly room for rents to grow since the average resident is getting wealthier. Basically, if a resident has a great deal of choice, he or she can shop for the best pricing and the best specials. If options are more limited, however, the pricing power shifts to the [housing provider], putting upward pressure on rates."
Apartment completions in the third quarter increased 7% YoY to a seasonally adjusted rate of 1.2 million, which is among the highest rates during the past 30 years. Similarly, starts in the third quarter were at 1.2 million, also among the highest rates in three decades.