Rents Fall Slightly as Apartment Demand Continues to Cool

A 'For Rent' sign posted in front of an apartment building in San Francisco, Calif., on June 2, 2021. Justin Sullivan/Getty Images

The median rent for an apartment in the United States has dipped 2.2 percent since August, pointing to a cooling of the country’s super-heated apartment market as demand slows and vacancy rates rise.

Apartment List, an online rental marketplace, observed a 1 percent decline in its national rent index in November, marking the third straight monthly decrease. Falling rents aren’t unusual around this time of year as rental activity tends to abate in the fall and winter; but the price drop since August is the steepest three-month decline going back to the start of the index in 2017.

By contrast, rents grew by 2.7 percent in August through November 2021, part of a record-breaking rental surge that contributed to soaring inflation last year. The national median rent jumped by 27.6 percent in 2021, Apartment List found. Despite the cooling in recent months, rents are still 23 percent higher than in January 2021.

The company noted that prolonged inflation of both rents and non-housing costs seem to be driving more Americans to move back in with family or roommates or put off searching for their own homes, slowing the rate of household formation.

Demand is weakening at the same time that new apartment construction is gathering steam, weighing on rental growth while pushing up vacancy rates. Apartment List’s vacancy index has gradually risen for more than a year, to its current level of 5.7 percent, higher than last year’s low of 4.1 percent, but still below the pre-pandemic norm.

Rents dropped in November in 93 of the 100 biggest cities that the company tracks, with Lexington, Kentucky, and Seattle, Washington, seeing the sharpest monthly rental declines of 4.4 percent and 3.4 percent, respectively. Even booming Sun Belt cities such as Las Vegas, Nevada; Phoenix, Arizona; and Tampa, Florida, have seen rents fall over the past six months.

The Midwest has seen the country’s fastest rent growth over the past six months, which could be due to the region’s relative affordability luring renters who have been priced out of other markets. Cincinnati, St. Louis, Indianapolis, Columbus, Ohio, and Kansas City, Missouri, top the list for six-month growth.

The median asking rent in the country’s 50 largest cities stood at $1,759 in September, declining $22.00 from its all-time July peak, according to real estate listings website Realtor.com. Rents for studios up to two-bedroom properties were up by double-digit percentages in Chicago, Boston, and New York City compared to September 2021, as a return to the office and in-person social activities restored some of the appeal of big cities.

More than 917,000 apartment units were under construction across the United States as of the third quarter, a near-record amount that is poised to boost the nation’s existing apartment stock by 3.4 percent, according to real estate software and data firm RealPage.