Demand for rentals decreased a bit even as more units entered the market. As a result, April asking rents rose 0.3% compared to 1.4% in March and 16% one year ago.
SEATTLE – The median U.S. asking rent rose 0.3% year over year to $1,967 in April – its 11th-consecutive month of slowing growth, according to a report from Redfin.
One month earlier, rents rose 1.4%; one year earlier they were up 16%.
However, the median asking rent fell 0.2% month-to-month, which Redfin calls notable because rents typically rise at this time of year.
The major reason for the rent slowdown is an expanding pool of rental units to choose from. The homebuilding boom over the last decade-and-a-half increased the number of new rentals on the market, and landlords are now grappling with rising vacancies. Completed residential projects in buildings with five or more units jumped 60% year-over-year on a seasonally-adjusted basis to 484,000 in March.
There are only three other instances since the 1980s when completions were higher, and the rental vacancy rate ticked up to 6.4% in the first quarter – its highest level in two years.
“The balance of power in the rental market is tipping back in tenants’ favor as supply catches up with demand,” says Redfin Deputy Chief Economist Taylor Marr. “That’s easing affordability challenges and giving renters a little wiggle room to negotiate in some areas. … but the scales could tip back in favor of landlords if homebuilders pump the brakes on new construction in response to slowing rent growth.”
Rent growth is also decelerating because many people are opting to stay put. Fewer people are moving due to economic uncertainty, slowing household formation, still-high rental costs in many markets, and the rising cost of other goods and services due to inflation.
Top markets for declining rents in April
- Austin, Texas: Down 14.3%
- Phoenix, Arizona: Down 9.6%
- Las Vegas: Down 7.1%
- Oklahoma City, Oklahoma: Down 6.4%
- Chicago Down 6%
- Birmingham, Alabama: Down 4.5%
- Sacramento, California: Down 4%
- Memphis, Tennessee: Down 3.6%
- Seattle: Down 3.2%
- Dallas, Texas: Down 2.8%
Much of the nation’s homebuilding has taken place in the Sun Belt. Phoenix and Austin both ranked in the top five metros with the highest number of multifamily building permits in March.
“A lot of renters took on roommates or moved in with family when rents increased dramatically during the pandemic, which left more rentals and fewer renters needing places,” says Van Welborn, a Redfin Premier real estate agent in Phoenix. “Landlords who increased prices too quickly are now feeling the impact as the market calms and rents decrease to more reasonable levels.”
Welborn said the short-term rental market is also cooling due to an oversaturation of Airbnbs and new restrictions on hosts.
Top markets for rising rents in April
Many midwestern housing markets have held up relatively well because they remain affordable compared to pandemic boomtowns like Austin and Phoenix. That’s in part because they haven’t seen large waves of people moving in and out, which is what drove the booms and busts in many southern and western markets, Marr said.
- Providence, Rhode Island: Up 16%
- Raleigh, North Carolina: Up 12.4%
- Indianapolis, Indiana: Up 10.9%
- Charlotte, North Carolina: Up 10.5%
- Cleveland, Ohio: Up 9.7%
- Columbus, Ohio: Up 8.3%
- Kansas City, Missouri: Up 8%
- Milwaukee, Wisconsin: Up 8%
- Pittsburgh: Up 7.9%
- Nashville, Tennessee: Up 7%
© 2023 Florida Realtors®