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For years, it\u2019s felt as if rent has gotten out of control. And that\u2019s partially true, considering median rent prices are more than 21% higher today than they were in 2019. But rents are starting to drop ever so slightly.\u00a0<\/p>\n
Asking rents dipped just 0.4% year-over-year in June, but before you get too excited, the median asking rent is still $305 higher than the same time in 2019 before the pandemic, according to Realtor.com\u2019s June 2024 Rental Report<\/a>. The median asking rent in June was $1,743.<\/p>\n While there\u2019s been a slight year-over-year decline in rent, prices have actually been increasing month-over-month, which experts say is typical of spring homebuying or home-renting season. The main factor driving year-over-year rent declines, however, is actually an oversupply in certain markets. While the U.S. is short roughly 4.5 million housing units, according to Zillow<\/a>, there\u2019s still an oversupply of apartments in some markets. That\u2019s because the apartments that started being constructed during the pandemic are finally coming to fruition.\u00a0<\/p>\n \u201cThe situations in these markets reflect the economic rules of supply and demand,\u201d Brian Zrimsek, industry principal at property technology firm MRI Software<\/a>, tells Fortune<\/em>. \u201cProperties where construction started during the pandemic are now coming online, increasing inventory and putting downward pressure on price.\u201d That\u2019s made it surprisingly difficult for some property owners to find tenants, with less than half (just 47%) of new apartments completed at the end of 2022 being rented within three months, according to Redfin<\/a>.<\/p>\n The drop in asking-rent prices isn\u2019t anything to call home about, however. Rent was only $11 less in June than it was in May, according to Realtor.com. \u201cNew renters will get better deals, but the decreases probably equate to the costs of a few Starbucks<\/a> trips,\u201d Zrimsek says.\u00a0<\/p>\n Still, Erin Sykes, chief economist and real-estate wealth adviser at Nest Seekers International<\/a>, sees a drop in rent prices as a \u201crealignment of supply and demand for rental.\u201d<\/p>\n \u201cMost landlords own at a low price and interest rate, so pulling back on rent will not negatively affect them as most will continue to be very profitable,\u201d Sykes tells Fortune<\/em>. \u201cRenters, on the other hand, may start to have more options and thus be more motivated to make a move than when prices were at their peak.\u201d<\/p>\n Greg Clement, CEO of real-estate software company Realeflow, has a different view. Charging lower rents could hurt the bottom line for some landlords, but he says it\u2019s still \u201cgreat news\u201d for renters.\u00a0<\/p>\n \u201cLower rents mean they make less money, which might lead to less maintenance and fewer upgrades on properties,\u201d Clement tells Fortune<\/em>. \u201cLandlords might need to get creative to attract and keep tenants, maybe by offering better amenities or services.\u201d<\/p>\n That scenario has been particularly evident in luxury apartments, where landlords and property-management companies are offering extravagant amenities and services like onsite IV hydration drips and spa treatments. It\u2019s all part of the \u201camenities arms race<\/a>\u201d to attract and retain residents while rental competition remains high for landlords and property-management companies in some housing markets.<\/p>\n Rent rates have \u201cdefinitely dropped, but it\u2019s a mixed bag depending on where you look,\u201d Clement says.<\/p>\n In June, the markets with the most significant year-over-year declines were all in the south, including Austin, Texas (a 9.5% decrease), San Antonio, Texas (-8.2%), and Nashville (-8.1%), according to Realtor.com, which says this downward trend is \u201cunsurprising\u201d considering the increase in new rental units.\u00a0<\/p>\n However, midwest markets showed the most rental price growth. Indianapolis saw a 4.4% jump and Milwaukee and Minneapolis asking rents were up 3.7%. Coastal markets showed mixed results, with Los Angeles asking rents down almost 3%, but New York City rents up 0.6%.\u00a0<\/p>\n \u201cSome big cities have seen noticeable reductions, while other areas, especially in the suburbs and countryside, might not feel the same impact,\u201d Clement says. \u201cOverall, though, rents are trending downwards, which is a big shift from the constant hikes we\u2019ve seen over the last few years.\u201d<\/p>\n However, it\u2019s still important to note the U.S. is still \u201cchronically undersupplied, and buying a home is far beyond the means of many people, who are renters by necessity,\u201d Zrimsek says. \u201cThis is an ongoing macroeconomic problem that the multifamily industry faces.\u201d<\/p>\n<\/div>\nThe drop in rent prices isn\u2019t all that great<\/h2>\n
What rents are doing in major markets<\/h2>\n
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