Great news for renters: the asking rents for multi-family homes have fallen for the fifth consecutive month as found by the latest Rental Report covering the month of September published by Realtor.com.
According to the Rental Report, September marks the fifth month in a row of year-over-year declined for 0-2 bedroom properties.
All-in-all, the median asking rent in the top-50 metropolitan areas now stands at $1,747. This number is down $5 (-0.6%) month-over-month and $29 from the rental market peak a year ago. However, this number is still $388 (or 24%) compared to pre-pandemic times. Median rent declined for all size categories: Studio: $1,447, down -0.5% (-$8) year-over-year; 1-bed: $1,630, down -0.3% (-$5) year-over-year; 2-bed: $1,934, down -0.7% (-$13) year-over-year.
The annual rate of multi-family completions ticked up again in September, but data shows strong demand for rental units based on vacancy rates and times.
Again, September marked the fifth month of falling rent prices; the median asking price for a two-bedroom unit declined 0.7% in September to a median rate of $1,934 on a national scale which is $35 less than the market peak a year ago. Nevertheless, the larger unit rents had the highest growth rate over the past four years, up by $403 (26.3%).
The rent for one-bedroom units slipped -0.3% in September 2023 on a year-over-year basis, marking the fourth decline in a row, though September marked a more moderate pace compared to the decline of -0.5% in August. The median rent was $1,630, $22 lower than the peak observed during last July, but still $316 (24.0%) higher than in September 2019.
In September, the median asking rent for studios fell by -0.5%, marking the third consecutive month of annual declines, a slightly faster rate when compared to the decline of -0.2% in August. The median rent of studios was $1,447 in September, down by $24 from its peak seen in Feb. 2023. Nevertheless, the median asking rent for studios was still $216 (17.5%) higher than four years ago–a significant jump that is only slightly smaller than that seen in larger units.
"As rents ease and both home prices and mortgage rates continue to climb, it's become more economical to rent than to buy in nearly all major markets," said Danielle Hale, Chief Economist at Realtor.com. "However, even with an influx of new apartment units coming onto the market and putting a lid on rent growth, renters are claiming these new apartments faster than prior to the pandemic. Those considering new housing options will want to do their research on their desired neighborhoods, determine their priorities, and set their budget well ahead of time if possible, so they're ready to move quickly when the time comes."
The rate at which multi-family units are being completed are a feat in itself: in September 2023, the annual completion rate of multi-family buildings with 5 or more units stood at 445,000 units, which increased 10.1% month-over-month and 15.0% year-over-year. Although this additional rental inventory is undoubtedly a positive development for renters, the rapid rate at which these units are being absorbed suggests that demand in the rental market remains robust.
According to the Census Survey of Market Absorption of New Multifamily Units (SOMA), the first quarter of 2023 saw the completion of 82,310 apartments in buildings featuring five or more units. Remarkably, within the initial three months following completion, 61% of these newly finished apartments were rented, indicating a strong demand. Notably, units with asking rents below $1,250 exhibited the highest absorption rates during this period, highlighting a pronounced demand for affordable rental options.
"With a record number of new units coming onto the market driving rent prices down, those who may have given up hope of homeownership may be able to leverage more affordable rental options – including downsizing to a smaller unit or considering a roommate for the near term – to help build savings for a future home," said Jiayi Xu, Economist at Realtor.com. "Households considering their next move can tap into tools like the free Realtor.com® rent or buy calculator to help weigh their options."
Click here to read the report in its entirety.