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U.S. multifamily rents have slipped since record highs about a year ago, but still remain relatively high despite an influx of new supply, according to a new report by Redfin.
The median asking rent nationwide came in at $2,029 in June, up from $1,995 in May and $2,019 in June 2022, but down from a record high of $2,053 set in August 2022, according to the company. Expressed as percentages, rents gained 0.5% year-over-year in June, but were down in May 0.6% year-over-year.
“The housing market tends to be ‘downside sticky,’ which means rents don't typically fall much even when renter demand pulls back,” Redfin Deputy Chief Economist Taylor Marr said in a statement.
Instead of lowering rents when business is slow, landlords often offer such concessions as a free month’s rent or discounted parking, which tends to be less of a hit to profits, Marr said.
Demand is still fairly strong for apartments, with 84,000 units absorbed during the second quarter of 2023, the largest quarterly absorption since the first quarter of 2022, when the total was roughly the same, according to RealPage data.
U.S. apartments were 94.7% occupied as of Q2 2023, which is close to the national 20-year average, RealPage reports.
Supply is expanding. About 108,000 new units came online during Q2 2023, RealPage notes, pushing the trailing 12-month figure to some 368,000 new apartment units.
Though nationally rents are still elevated, in some markets supply growth is putting significant downward pressure on rents, however sticky they might be in principle. Markets in the West and South in particular saw year-over-year drops during the second quarter.
The steepest annual drop was 4% in Phoenix, according to RealPage, while Las Vegas was down 3.4% and Sacramento, California, down 2%. Austin experienced a 1.6% drop and Jacksonville, Florida, rents were down 0.7%.
New multifamily supply is robust enough to affect market fundamentals, but that doesn't mean there will be an oversupply in most places, RealPage predicts. Supply and demand will come to closer alignment, something that hasn't been the case in more than a decade of underbuilding, the company said.
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