Rent Prices Continue Their Decline

Realtor.com's November 2023 Rental Report showed that the U.S. median rent continued to see a year-over-year decline for the seventh month in a row in November, down -0.6% for 0–2 bedroom properties across the top 50 metros, a pace similar to the -0.5% seen in October.

The median asking rent was $1,717, down by $12 from last month and $59 less from the peak seen in July 2022. However, it was still $313 (22.3%) higher than the same time in 2019 (pre-pandemic). As noted in the July Rental Trends report, seasonality and recent momentum in the rental market make it very unlikely the market will see a new peak rent in 2023.

Rent Declines Continued for All Units

In November 2023, the median asking rent for two bedroom units dropped -0.6%, a pace similar to the -0.5% seen in October, yet still marking the seventh consecutive month of annual declines. The median rent for two bedrooms was $1,904 nationally, $65 (-3.3%) lower than the peak seen last July. Nevertheless, larger unit rents had the highest growth rate over the past four years, up by $384 (25.3%).

The rent for one-bedroom units slipped -0.6% in November 2023 on a year-over-year basis, marking the sixth decline in a row, marking a faster pace compared to the decline of -0.1% in October. The median rent was $1,594, $58 lower than the peak observed during last July, but still $286 (21.9%) higher than in November 2019.

In November, the median asking rent for studios fell by -0.9%, marking the fifth consecutive month of annual declines, and it was the largest year-over-year decline since the rate started to drop below zero in July. The median rent of studios was $1,442 in November, down by $29 from its peak seen in Feb. 2023. Nevertheless, the median asking rent for studios was still $202 (16.3%) higher than four years ago–a significant jump that is only slightly smaller than that seen in larger units.

Rents in Western Metros Continue to Cool While Northeastern Renters Face Higher Costs

In November 2023, the median rent in the West was -2.3% lower than a year ago. Specifically, big metros such as San Francisco (-2.8%) and Los Angeles (-3.8%) continued to see year-over-year rent declines. In contrast, rents in populous northeastern metros such as New York (5.6%) and Boston (6.1%) continued to experience faster growth.

One potential explanation for this discrepancy could be attributed to the faster growth of new rental supplies in the West. While the 2023 annual completion rates of multi-family homes rose in all four regions, regional variations exist. Notably, between January to October 2023, the seasonally-adjusted annual completion rate for multi-family homes in the West surpassed its average rate of 2017-2019 by 23.2%, indicating substantial growth, whereas the Northeast only experienced a marginal increase of 0.7% during the same timeframe. Consequently, the more rapid growth of new rental units in the West exerted downward pressure on rental prices.

Furthermore, the robust labor market in the Northeast region could account for the heightened demand for rental units. In October 2022, the average unemployment rate in the Northeast stood at 3.4%, which was 0.3 percentage points lower than its western counterparts at 3.7%. However, a year later, the gap in unemployment rates between the Northeast and the West widened to 0.7 percentage points, with the Northeast recording a 3.5% unemployment rate and the West at 4.2%.

Consequently, the stronger labor market in the Northeast is likely contributing to an increased demand for rentals, rendering it more competitive compared to the rental market in the West.

Rents in Midwest Markets Continue to See Growth

In November 2023, rent growth in Midwest metros registered a rate of 2.0%. As the Midwest markets tend to have greater affordability, the stronger growth in these markets likely results from this benefit even as it may reduce existing affordability. Specifically, Milwaukee, (5.4%), Cleveland (4.1%), and Cincinnati (2.9%) emerged as the top-performing markets with the fastest year-over-year growth in the Midwest. Meanwhile, the robust labor market, characterized by a 3.5% unemployment rate in October 2023, is likely contributing to increased rental demand.

Despite the Midwest experiencing substantial growth in new rental supplies, the swifter absorption rates of these properties underscore the region’s robust rental market demand.

Rents in Southern Markets Declined

In November 2023, the median asking-rent for 0-2 bedroom rental properties in the South was 0.4% lower than one year ago. Specifically, the top 3 metros experiencing the most significant year-over-year rent declines are Orlando, FL (-6.0%), Austin, TX (-5.4%), and Dallas (-4.1%). Between October 2022 and 2023, the South experienced a slight increase in the unemployment rate, which edged up from 3.1% to 3.2%, signaling a robust labor market and indicating strong rental demand despite the uptick.

While the demand remains vigorous, the supply side presents an even more compelling picture with a substantial 32.0% growth in the annual multifamily completion rates in January to October 2023 than a year ago. This heightened supply has contributed to a downward push on rent prices, resulting in an overall decline in rental costs.

To read the full report, including more data, charts, and methodology, click here.