Apartment Rent Growth Declines for the First Time Since Pandemic Onset

The apartment market, once a hotbed of growth, is seeing a downward trend in rent prices, marking a shift from its previous trajectory, as noted in the September 2023 Apartment List National Rent Report.

Rent trends: Specifically, the rent index decreased by 0.1% in August 2023. Interestingly, this decline started a month earlier than it did the previous year, bucking the typical trend of prices rising in the spring and summer and dropping in the fall and winter. Just last year, all 100 surveyed cities reported positive year-over-year rent increases.

Contrast to previous years: The current annual rent growth is at -1.2%, meaning apartments are now 1.2% cheaper than they were a year ago. This is a significant change from past years when annual rent growth was as high as 18% nationally, with some cities even witnessing growth surpassing 40%.

Causes of rent volatility: Rent fluctuations primarily stem from the balance between apartment vacancies and renter demand. A previous shortage in 2021 and 2022 caused rents to soar. However, a 22-month increase in the vacancy index, now at 6.4%, and new apartment constructions have shifted the dynamics, making property owners more competitive for tenants.

City-wise overview: More than half of the country’s 100 largest cities report decreasing rents. Significant drops are seen in “zoom towns” like Arizona, Nevada, Idaho, with Oakland, California, noting an 8.7% decline. Meanwhile, Midwest and New England cities, such as Chicago and Boston, show modest recent rent growth compared to prior years.

➥ THE TAKEAWAY

Zoom out: We’re witnessing a pivotal shift in the rental landscape from skyrocketing rents to potentially greater leverage for renters. The slight rent decrease in August marks the beginning of a quieter rental phase, harking back to the early pandemic times in its year-over-year growth rate. With a slump in apartment demand and a surge in construction projects, the trend suggests a continued cooling of rent growth in the coming months.