Rents in the 50 largest metros dropped to $1,747 in September, down $29 from the peak seen in July 2022, according to a new report from Realtor.com.
Realtor.com’s September Rental Report found that rent prices, while still significantly higher than pre-pandemic levels, dipped on an annual basis for units of all sizes. Additionally, an uptick in construction rates of multi-family homes helped to push down rents.
Breaking down the rent changes for different units, studio rents dropped 0.5% to $1,447, one bedroom rents dropped 0.3% to $1,630, and two bedroom rents dropped 0/7% to $1,934.
Key highlights:
- While a near-record-high number of new apartment units coming into the market is helping drive down rent prices, these units are being absorbed swiftly by renters, signaling robust rental demand. The annual completion rate of multi-family buildings with five or more units increased 10.1% month over month and 15.0% year over year.
- Renters are moving particularly quickly on affordable units. The absorption rate for affordable rental units—those renting for $1,850 or lower, approximately 30% of the median household income—was 69.8% within three months of completion. Within the same timeframe, 57.2% of those priced over $1,850 were rented.
- As renters across the country move more quickly on new multifamily construction, absorption rates within three months after completion (for apartments built in Q1 2023) exceeded pre-pandemic levels in all four regions.
- The Midwest experienced the most significant increase in absorption rates within this window, likely due to greater affordability, although increasing demand may begin to erode those savings.
- Among the top 10 metros experiencing the fastest year-over-year rent growth, four are in the Midwest: Milwaukee (3.9%), Cincinnati (3.6%), Cleveland (3.2%), and Indianapolis (3.0%).
- The other six metros with the highest annual rent growth are spread throughout the South and Northeast: Louisville/Jefferson (4.6%), Richmond (4.6%), New York, (4.5%), Birmingham, (4.4%), Washington, D.C. (4.2%), and Boston (4.0%).
- In the West, the median rent in September dropped by -3.1% compared to a year ago. Big metros such as San Francisco (-4.8%) and Los Angeles (-3.4%) continue to see some of the largest year-over-year declines.
- Interestingly, the West also saw a higher absorption rate for new apartments, which may be driven by a growing demand for newer, more affordable apartments, rather than an increase in overall demand.
- The South is home to the top three metros with the most significant year-over-year rent declines: Austin, Texas (-7.3%), Dallas (-6.2%) and Orlando, Fla. (-5.4%).
- Austin, a prominent tech hub, saw the greatest decrease in median asking rents compared to the previous year, similar to its counterparts in the West.
- Rent price trends in Dallas and Orlando, areas that also experienced tech growth during the pandemic, closely resemble their western tech peers.
Major takeaway:
“As rents ease and both home prices and mortgage rates continue to climb, it’s become more economical to rent than to buy in nearly all major markets,” said Danielle Hale, chief economist at Realtor.com. “However, even with an influx of new apartment units coming onto the market and putting a lid on rent growth, renters are claiming these new apartments faster than prior to the pandemic. Those considering new housing options will want to do their research on their desired neighborhoods, determine their priorities, and set their budget well ahead of time if possible, so they’re ready to move quickly when the time comes.”
Realtor.com Economist Jiayi Xu added, “With a record number of new units coming onto the market driving rent prices down, those who may have given up hope of homeownership may be able to leverage more affordable rental options—including downsizing to a smaller unit or considering a roommate for the near term—to help build savings for a future home. Households considering their next move can tap into tools like the free Realtor.com rent or buy calculator to help weigh their options.”
For the full report, click here.
