Rent prices continued to move up in May, the fourth consecutive month, Apartment List says in its June report.
Eighty of the nation’s largest 100 cities had rents increase in May, according to the report. But on a year-over-year basis, rent growth is positive for only 43 of these cities.
While there have been steady small monthly increases, overall rent growth remains sluggish so far in 2024.
“The national median rent increased by 0.5% in May and now stands at $1,404, but the pace of growth slowed slightly this month. This is typically the time of year when rent growth is accelerating amid the busy moving season, so sluggish growth this month indicates that the market is headed for another slow summer,” Apartment List economists write in the report.
Seasonal increases have been mild while seasonal declines have been steeper than usual.
“As a result, apartments are on average slightly cheaper today than they were one year ago. Year-over-year rent growth nationally currently stands at -0.8 percent and has now been in negative territory since last summer. But despite this cooldown, the national median rent is still more than $200 per month higher than it was just a few years ago,” the report says.
Vacancy index continues trending up
With the supply of new apartments coming on line, multifamily occupancy has been slowly but consistently easing for more than two years.
“As of May, our vacancy index sits at 6.7 percent, the highest reading since August 2020. And there’s good reason to expect that it could rise even further during the remainder of the year.
“Despite a recent slowdown in new permits being issued and new construction projects breaking ground, the number of multifamily units under construction remains near record levels. (The year) 2023 saw the most new apartments complete construction in more than 30 years, and an even greater number of new units are expected to come on the market this year. This means that renters should have more available options than they have in some time, especially in the Sun Belt markets, where construction activity has been strongest,” the report says.
Conclusion
Rent prices in May show that rent growth is stalling out at a time of the year when it is normally increasing.
“Rent increases are currently being moderated by a robust construction pipeline expected to deliver a decades-high number of new apartment units in 2024. Improving consumer sentiment about broader macroeconomic conditions may be driving a modest rebound in rental demand, but that bounce-back has so far been outweighed by the impact of incoming supply,” Apartment List economists say.
