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For U.S. apartments, it’s a tale of two markets.
The average asking rent across the country fell by $6 last month to reach $1,750 at the end of September, the sharpest monthly decline since November 2022, according to a report by Yardi Matrix released Tuesday.
The average rental growth rate also slowed year-over-year by 30 basis points in September to 0.6 percent, according to the report, which is based on advertised rents for market-rate units across 136 cities.
The slowdown was most pronounced in markets with big development pipelines.
Sunbelt metros where construction boomed in the wake of the pandemic — Dallas, Austin and Phoenix chief among them — are struggling to absorb a glut of new supply, according to the data.
Those three cities all saw negative rent growth in September, as did at least one eastern outpost — Charlotte, North Carolina, where newly built units hitting the market for the first time comprise 7.6 percent of the entire apartment stock, according to Yardi.
But the mile-high city of Denver, Colorado takes the cake for the steepest year-over-year decline, ending the month with rents down 4.3 percent compared to the same time last year.
In total, about 525,000 new units are in lease-up nationally, forcing landlords to offer concessions or slash advertised rents to attract tenants.
Rents jump in low-supply markets
By contrast, coastal and midwestern cities are still seeing robust rent growth year-over-year, with average rent at the end of September up 4.8 percent annually in New York, 3.9 percent in Chicago and 3.3 percent in San Francisco.
The Bay Area in particular has begun to rebound, fueled by low housing supply and the AI boom, according to the report. New household formation — a driver of multifamily demand — is projected to slow dramatically in the next decade from about 1.5 million annually since 2015 to fewer than 900,000 annually, according to one estimate by Harvard University’s Joint Center for Real Estate Studies cited by Yardi. On the other hand, fewer people are looking to buy homes due to high prices and mortgage rates, which could boost demand in the multifamily sector.
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