The national rent index fell by 0.3 percent over the course of January, marking the fifth straight month-over-month decline, Apartment List says in their February report, while the vacancy rate rose.
The rent decline in January was a little less than last fall, but still different from the usual seasonable patterns of the past, “signaling the continuation of a broader cooldown in market conditions,” the report says.
Some highlights from the report:
- Year-over-year rent growth is continuing to decelerate, and now stands at 3.3 percent, its lowest level since April 2021.
- 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 cooldown in rent growth is being mirrored by continued easing on the supply side of the market.
- This month’s reading represents the first time that our vacancy index has surpassed the 6 percent threshold since April 2021. The vacancy rate is now just barely below the pre-pandemic norm.
Property owners may be competing for renters in 2023
“Our vacancy index now stands at 6.1 percent, surpassing 6 percent for the first time since spring of 2021.
“With a record number of multifamily apartment units currently under construction, we expect that supply constraints will continue to soften. 2023 could be the first time in years that we see property owners competing for renters, rather than the other way around,” the Apartment List Research Team writes.
Rent slowdown has been widespread
The recent rent slowdown has been widespread across the country.
Big metros such as Seattle, New York City, Washington, D.C. and San Francisco all experienced rent declines more than double the national rate.
“Over the past six months as a whole, no large metro area in the country has experienced positive rent growth,” the report says.
This recent cooldown shows a shift in market conditions that goes beyond seasonality alone, as cooling demand collides with growing supply.
“We’re likely to see a return to positive rent growth as moving activity picks back up in the coming months, but we expect that growth will remain modest throughout 2023, and year-over-year growth rates are likely to continue dipping as monthly growth remains slower than the 2022 pace,” the Apartment List Research Team writes.