The national rent index increased by 0.4% in May, but despite rents ticking up for the fourth consecutive month, rent growth is currently slowing at the time of year when it typically ramps up and apartment vacancy is growing, Apartment List says in its June report.
“Slow rent growth in May caused year-over-year rent growth dip to further negative, falling to -0.5 percent, after having gradually inched closer to positive territory over the prior six months,” the Apartment List research team writes in the report.
National average rent is now $1,398, up $5 per month compared to last month, but down $6 compared to May 2024.
Following a period of record-setting rent growth through 2021 and the first half of 2022, the national median rent has now fallen below its August 2022 peak by a total of 3.1 percent, or $44 per month.
At the local level, 69 of the nation’s 100 largest cities saw rents rise in May.
“That said, we continue to see fairly steep year-over-year declines in the metros that have most rapidly expanded their multifamily inventory; these include Austin (-6.3 percent year-over-year), Denver (-4.8 percent), and Phoenix (-3.1 percent),” the research team writes.
Multifamily vacancy rate hits 7%, a new peak
Vacancies have been opening up steadily for more than three years.
The surge in multifamily construction, which has now started to decline, has led to some of the vacancy increase.
“However, there are still over 700,000 multifamily units under construction, so even as the level of new supply hitting the market falls sharply from last year, it will continue to be robust by historic standards. As new apartment completions decline, the vacancy rate will likely begin to tighten again, but for now, we’re still seeing vacancies rise,” the report says.
List-to-lease time retreats from all-time high
“The shortening of list-to-lease time that we’ve seen since the start of this year is in line with the seasonal return to positive month-over-month rent growth that we’ve observed in tandem.
“Units are currently sitting vacant just one day longer than they were at this time last year, but are still sitting for eight days longer than they were in mid-2022 when the market was at its tightest,” the report says.
Conclusion
May’s 0.4 percent increase shows rent prices continuing to trend up, but the slowing pace of rent growth is signaling demand weakness heading into peak moving season.
“As the level of new supply coming online continues to abate, we expect to see occupancy tighten and rent growth strengthen in the back half of this year, assuming that demand remains relatively stable. But amid a more uncertain macroeconomic outlook, stable demand is far from certain,” the research team writes.
Read the full June report from Apartment List here.
