Rents continue heading in the right direction as rents increased again in July as the national median rent was up 0.2 percent in July, according to the Apartment List August report.
The national median rent is now $1,388. While rents are still down 1.1% compared to one year ago, year-over-year rent growth has been inching up and the vacancy rate is inching down, signaling a modest tightening of rental market conditions.
However, the off-season cooldown in prices is likely to begin in another month or two. This trend is in line with typical seasonal patterns – prices generally increase in the spring and summer when most moves take place, and then soften in the fall and winter as moving activity slows.
Rental market may finally be stabilizing
“The broad contours of this seasonal pattern are a dependable trend, but in recent years we’ve seen sharper winter dips and more modest summer bumps as the market has gone through a soft spell amid a wave of new multifamily construction,” the Apartment List research team writes in the report.
“As a result, full year rent growth has been negative for each of the past three years. Currently, the national median rent is 1.1 percent cheaper than it was one year ago. While still negative, year-over-year rent growth has now ticked up for three straight months, after bottoming out at -1.6 percent in April. That April figure matched a record low in our estimates, going back to 2017, as demand stagnated amid a backdrop of macroeconomic uncertainty. But we now appear to have hit an inflection point, signaling that the rental market may finally be stabilizing as construction slows and the recent influx of new units gets absorbed.”
Multifamily vacancy ticks down to 7.2%, first decline since 2021
The recent multifamily vacancy decline has been modest, and the vacancy rate remains elevated above its long-run average.
And with mixed news on the labor market combined with renewed inflation concerns, question marks around housing demand remain in play. Assuming that the vacancy continues to tighten, the change is likely to continue to be slow and gradual.
List-to-Lease time remains elevated at 30 days
“This month’s reading is the longest that we’ve seen in any July going back to 2019 when our tracking begins (January’s 41 days set the overall record),” the research team writes.
Units are taking two days longer to turn over than at this time last year, and twelve days longer than they were in July 2021 when the market was at its hottest. This lengthened list-to-lease time is a reminder that despite the recent inflection points in pricing and occupancy, rental market conditions remain decidedly cool.
August multifamily rent report conclusion
“We are seeing signs that the tide may be turning on the soft conditions that have defined the market over the past three-plus years.
“The coming months will provide more clarity on whether the market is simply plateauing or truly turning the corner to meaningfully tighter conditions,” the Apartment List research team writes.
