New data from Realtor.com® shows that rental prices continued to decline for the month of December, as the national median asking rent fell below $1,700 for the first time since April 2022. According to Realtor.com, this is a 1.1% decline year-over-year from December 2023.
Absorption rates, the share of newly built rental units successfully leased within three months of construction, fell to 55%, according to Realtor.com’s analysis. This was in line with pre-pandemic levels of rental absorption rates in 2019. According to Realtor.com, the surge in new multifamily housing construction is also a contributing factor to the decline in rental rates, paired with the absorption rate. Realtor.com also notes that the rental growth rate has not kept pace with overall inflation in the past five years, as the latter rose by 22.8%, while the former saw a 16% rise.
“We are reaping the benefits of the multifamily surge in housing starts that lasted throughout 2023, but as starts and completions slow, we anticipate seeing more balance in the rental market ahead,” said Danielle Hale, chief economist at Realtor.com. “For renters, balance is welcome and signals an end to the pandemic era rental market spikes.”
Another major trend noted in Realtor.com’s report was the fact that the absorption rate for pricier rentals exceeded the absorption rate for more affordable rentals by a relatively wide margin. The report stated that the weighted average absorption rates within the timeframe of a three-month completion was 56.3% for affordable apartments compared to 53.8% for more expensive units. This shows a slight bias toward affordable rental units relative to supply.
The Northeast was the region with the highest absorption rate, and the only region with a higher absorption rate in Q3 2024 compared to the same time period from the previous year, rising from a 58% clip in 2023 to 67% in 2024. The absorption rate corresponded with rising rental prices for this region, indicating there is still strong demand despite this rental price growth. Indeed, the New York-Newark-New Jersey metro saw a 5.3% rise in rental growth year-over-year to a median price of $2,967.
The West experienced the largest decline in absorption rates, with a precipitous drop from 72% in Q3 2023 to 58% for the same timeframe in 2024. This can be attributed to the increased amount of supply for rentals in the region. With more supply available, eight out of the 11 Western rental markets reported a decline in price. This was led by the Denver, Colorado, metro (5.9% decline), followed by Riverside, California (4.8% decline) and San Francisco, California (4.3% decline).
