Asking rents for newly constructed apartments have seen the biggest year-over-year increase in 18 months, rising 1.5% to a median of $1,802 during the third quarter. The increase followed two consecutive quarters in which rents for new apartments fell by more than 7%, according to a Redfin report. The median rent for new apartments had fallen as low as $1,714 during the second quarter, which was the lowest level since mid-2021.
On a regional basis, asking rents fell 3.6% in the Northeast during the third quarter as newly finished apartments increased 13% year-over-year to 11,390 units in the second quarter. That is the highest level of new completions since Q4 2022, said Redfin. The median new asking rent in the region was $2,300.
Other regions across the country saw higher rents, including the West, which had the largest uptick in the median by 4.4% to $1,899. This is despite a 34.1% increase in new apartment completions, or 25,920 new units, the report found.
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Rents in Midwestern markets ticked up 3.3% to $1,519 following a 47% increase in new apartment completions, and the South posted a minor increase in median rents of 1.1% to $1,733 after adding nearly 60,000 new units, nearly as many as the other three regions combined.
“We would usually predict that rents will stay flat, or even potentially fall, when there are so many new apartment buildings opening up. What’s interesting in the third quarter is that rents are rising by more than the national average in the West and Midwest, even after the number of new apartments spiked between 30-50%,” said Redfin senior economist Sheharyar Bokhari. “This is likely due to more new apartments being built in more expensive metros in each region, pushing the overall levels up.”
About half of newly constructed apartments completed during the second quarter were rented within three months, Redfin said. That represents the second-lowest seasonally adjusted absorption rate since mid-2020. The absorption rate of 50% to 55% seen over the past two quarters marks a return to rates experienced typically in the pre-pandemic period.
Apartment construction is slowing, said Redfin, with Census data showing it down nearly 20% from last year, as of October. The number of permits issued for new apartment buildings also is down about 20%.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
