National rent growth was flat year-over-year meaning apartments are renting for the same price as they did a year ago on average, Apartment List says in its July rent report.
“This marks a major shift from the recent past, when annual rent growth topped out at nearly 18 percent nationally and over 40 percent in a handful of popular cities,” Apartment List economists write in the report.
Rent growth in 2023 has come in at a much slower pace than previous years thanks to a combination of sluggish demand and increasing supply.
While the average rents are flat year-over-year, rents did increase in June in 73 of the nation’s 100 largest cities, but thanks to sluggish rent growth this year, prices are down year-over-year in 57 of these 100 cities.
Vacancy rate remains elevated
The supply side of the rental market also hit a major milestone this month: “Our vacancy index now stands at 7.2 percent, matching the peak vacancy rate that was measured at the height of the COVID-19 pandemic.”
With a record number of multi-family apartment units currently under construction, this vacancy rate will remain elevated and for the first time since the early stages of the pandemic and put pressure on property owners to find tenants, rather than the other way around.
Rental market slowdown in finally reflected in inflation numbers
The rent component of the Consumer Price Index (CPI) has finally peaked as is beginning to recede.
“Our index shows that the rental market has been cooling rapidly for a year, but the CPI housing component has just recently hit its peak. Despite the CPI’s measure of housing inflation remaining elevated, topline inflation has already meaningfully cooled.
“As the CPI housing component now gradually begins to reflect the cooldown that we’ve long been reporting, it will help to further curb topline inflation in the months ahead,” Apartment List economists write.
Rent growth report conclusion
June’s 0.4 percent national rent increase represents a further deceleration of the rental market, indicating that the market remains sluggish throughout what should be the busy moving season.
“Year-over-year growth fell once again, this time reaching zero for the first time since early in the pandemic. Even if the end of this summer brings a resurgence in demand, a strong construction pipeline should temper rent growth for the remainder of the year,” Apartment List economists write.