After months of decline, national rent growth turned positive in February, up by 0.3 percent, according to the March report from Apartment List.
“This month’s increase is of a similar magnitude to the typical February price change that we saw in pre-pandemic years. After a few months of record-setting price declines, it appears that rental demand is rebounding in line with the usual seasonal trend,” the Apartment List research team writes in the report.
After several months of rent declines, the year-over-year rent increase number now stands at 3 percent.
“Year-over-year growth is now pacing just slightly ahead of the average rate from 2018 to 2019 (2.8 percent), and is likely to decline further in the months ahead,” the Apartment List report says.
Property Owners May Soon Be Competing For Renters
As apartment construction continues, and more and more new multifamily apartments are completed, this additional new supply of housing will cause more new supply to become available to renters.
With more options then available to renters, “2023 could be the first time since the early stages of the pandemic that we see property owners competing for renters, rather than the other way around,” the research team writes.
The national rent growth turned positive and the report says rents increased in February in 62 of the nation’s 100 largest cities.
Vacancy Index Highest In Two Years
The report says it took ten months for the vacancy index to increase from 4.1 percent to 5.1 percent, but just six months for it to jump from 5.1 percent to 6.4 percent, where it sits today.
This month’s reading is the highest since February 2021, and is just barely below the 6.6 percent average rate from 2018 to 2019.
With more apartments under construction than at any point since 1970, the vacancy rate could continue to increase.
“As this new inventory hits the market over the course of the year, we could begin to see property owners competing for renters to fill their units, a marked change from the prevailing conditions of the past two years, in which renters have been competing for a limited supply of available inventory.”
Conclusion: A Year of Modest Rent Growth
Rent prices may not fall further, but they are also unlikely to increase significantly.
“This month’s data suggests that we’re beginning to see a mild rebound in rental demand, following a particularly slow off-season to close out 2022. That said, the surging rent growth that we saw in 2021 and the first half of last year should still be solidly behind us.
“Even if demand continues to strengthen, a robust supply of new inventory hitting the market this year should keep prices in check. It looks like 2023 is shaping to be a year of modest positive rent growth,” the Apartment List research team says.