Apartmentlist: Rent Drops Just Ahead?
Apartmentlist, one of the leading apartments-for-rent portals online has just released their rental marketing report for October.
The report shows rents dropped again last month part of a 3-month decline. The US median rent dropped by 0.7% to $1,354, and is down 1.2% YoY. It’s primarily a seasonal drop, however it’s not as steep compared to the decline experienced in October 2022.
Rent prices are up $350 per month on average than they were during the early part of the pandemic in 2020. Supply since that time has grown 6.4% and it shows in the steep drop in the national rent index. The momentum of that decline is most concerning for landlords.
Rents Still up in 2023
Overall, rent prices are still up 1.2% YTD during 2023. Prepandemic rent increases to date were about 3.5% for comparison.
The 5-year rent price curve shows the dangerously high leap during the pandemic and how the other side of that mountain is shaping up.
Median Rent Price Growth Chart. Screenshot courtesy of Apartmentlist
Dangerous Momentum
Rent growth since March of 2020, pre-pandemic was New York (16%), Los Angeles (6%), Chicago (11.2%), Houston (11.3%), Miami (31.2%), Dallas 21.1%), Denver (13.8%), Boston (10.2%), Oklahoma City (26.2%), and Phoenix (25.8%).
Of late however, Apartmentlist found rent prices have fallen in 81 of the 100 largest cities. Austin TX (-6.4%) and Oakland (-8.2%) suffered the largest decreases in rent prices. San Francisco has seen a decline of 13.2% since March 2020. They discovered this rent price decline started earlier this year (.1% in August, .5% in September, and .7% in October). October rents were down .8% last year.
5 Year Rent Price change year by year. Screenshot courtesy of Apartmentlist
Rent growth peaked in late 2021, but has been on a steep decline since, and the rate of growth has dropped below zero.
New Construction Glut Could Create Some Panic
A glut of multifamily new construction releases is happening now and will likely be in the first half of 2024. Vacancy rates in the south are climbing due to the higher construction activity taking place there. Rental apartment vacancy is back above where it was pre-pandemic.
Landlords hoping to keep pace with inflation will be pressured by falling rents, cost-burdened tenants, and an inability to pass on rising taxes to tenants.
The priority for 2024 will likely be in streamlining operations, and using property management software to manage finances better and introduce new services.
Avoid rent price drops by improving your tenant services and marketing with the powerful ManageCasa™ platform.
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