The U.S. multifamily market continued to soften in December with average monthly rents dropping 1% annually to $1,379, according to new data from ApartmentList.

In the last year, rents declined in 60 of the 100 largest American cities, the company reported. Rents dipped monthly as well, ticking down 0.8% in the fifth straight month-over-month drop.

While rental declines toward the end of a year are in line with most markets' typical seasonal patterns, with fewer renters moving, late 2023's dip has been sharper than what is normally experienced, the ApartmentList reports.

A record period of apartment construction across the country is culminating in a rush of new supply that is dampening rent growth despite demand from renters who can't afford to purchase a home. Delivery estimates vary, with CoStar forecasting roughly 433,000 new apartment units to be delivered in 2024, while RealPage predicts 670,000 new multifamily homes.

Nearly 1 million new units were under construction as of November, the highest in more than 50 years, according to the Census Bureau.

Investors are responding to the reversal in rent growth by buying fewer apartment properties, Multifamily Dive reports, citing MSCI data. Through November, multifamily sales were down 68% year-over-year to $5.1B. Prices also fell, down 12.1% compared with a year earlier, according to MSCI.

Major owners are feeling the heat as well. Recently, investment bank Jefferies downgraded apartment REIT Mid-America Apartment Communities from buy to hold. Compared with a year ago, the company's stock price is down about 15%.

Modest rent increases are forecast for 2024, The Wall Street Journal reports. Yardi Matrix is predicting that U.S. rents will increase 1.5%, while CBRE forecasts 1.2% growth, both lower than the 3.1% rate of inflation reported in November.

Even so, millions of renters are still squeezed by previous years' rent hikes, with renters by necessity — those who want to buy a home but can't — spending more than 31% of their income on rent, Yardi reports. Renters by choice spend less than 28%.