As new apartments continue to hit an already saturated market, more have been delivered to date this year than in all of 2023 — which itself set a 30-year record. The number of apartments completed in 3Q 2024 was the highest for a single quarter in 50 years, according to Apartment List’s national rent report for December 2024.
The result has been a continuous rise in vacancy rates and a slump in rent growth in many parts of the country, while more than 800,000 new multifamily units still under construction will not help matters. The vacancy rate continues to trend upward and has reached 6.8%, its highest level since the pandemic started.
The report showed that the national median rent dipped by 0.8% in November. Rent fell by $12 to $1,382, with the report predicting it will fall again before the end of the year, partly because some property owners are offering modest discounts during a historically slow time of the year. Even so, the national median rent is $200 higher than a few years ago – a few points below its August 2022 peak and more than 20% than it was at the start of 2021.
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The report also highlighted a discrepancy between rent trends in different areas. In 88 of the nation’s largest cities, rents fell month-over-month in November. But year-over-year, rent growth was negative in only 47 of them.
SunBelt states were worst affected. Austin was down 6.9%, Raleigh 4.1% and Jacksonville 3.5%. In addition to Florida and Texas, some Arizona and West Coast cities have also experienced declines. However, the opposite is true of many large cities in the Midwest including Cleveland, Louisville, Grand Rapids, and Detroit, as well as Northeastern cities like Hartford and Washington, D.C.
The report noted that rent growth follows a seasonal pattern, which has shifted in the last two years. In this period, monthly growth was fastest in March, two months earlier than before the pandemic, but became negative in August, one month earlier than expected. With more new supply and lower demand, “rents have increased only modestly during the peak moving season, and have seen more pronounced dips during the off-season,” the report commented.
There is one positive sign. The shelter component of the Fed’s consumer price index (CPI) finally appears to be nearing its peak and has been cooling off since last spring. “Rent CPI remains elevated, but it is no longer a blocker for the Fed,” the report stated.
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