Apartment rents may continue their slide from recent months as a large influx of supply is expected to cut down competition.
Multifamily rents declined in every major metropolitan area over the past six months prior to February, according to data by Apartment List reported by the Wall Street Journal. The listing platform estimated renters with new leases last month paid a median 3.5 percent below what they would have paid in August.
The same estimate noted the period marked first time rent fell for six consecutive months in the last five years.
An expected flood of supply could push rents even lower in the coming months. CoStar projects that there could be as many as 500,000 new apartments coming to the market this year, which would be the biggest influx of supply since 1986. That would provide more options and limit what landlords can charge in a less constrained environment.
Already, a fewer percentage of people are renewing their leases, ready to find more favorable prices elsewhere. Renewals declined last month to 52 percent, according to RealPage, the lowest share in January since 2018.
The decline in rents comes as tenants are under a record burden as measured by a recent average rent-to-income ratio.
Rent growth is still positive on an annual basis, but its pace is decelerating. Annually, rent growth for new leases in January ranged from 2 percent to 6 percent. In the six months from August through January, however, none of the 52 metros tracked by Apartment List recorded positive rent growth.
While the rental market is better for tenants than six months ago, the same can’t be said for 12 months before then, when the pandemic pushed both the housing and rental markets to unprecedented heights.
— Holden Walter-Warner
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