In a recent report by Redfin (NASDAQ:RDFN), the median U.S. asking rent in November decreased to $1,595, a 0.7% drop from the previous year, marking the lowest level since March 2022. The decline in rent also represented a month-over-month decrease of 1.1%. This downward trend in rent prices has brought the median rent to a point that is 6.2% below the all-time high of $1,700 recorded in August 2022.
The report further detailed that rental affordability has seen some improvement, with November being the 19th consecutive month of year-over-year declines in the median asking rent price per square foot (PPSF), which fell by 2.2% to $1.79. This is the first instance of the median PPSF dropping below $1.80 since November 2021.
The rental market, which has been relatively stable over the last two years, is showing signs of a slight downtrend in recent months. This is partly attributed to a significant increase in the number of new apartments completed this year, which has been the most in over a decade. The completion of new apartments surged by 22.6% year over year in the second quarter, leading to a vacancy rate for buildings with five or more units climbing to 8% in the third quarter, the highest since early 2021.
Redfin Senior Economist Sheharyar Bokhari commented on the current state of the rental market, stating, “Renters in areas where construction has boomed are in a sweet spot right now. Affordability is improving as rents fall and wages rise, and there is increased choice with more and more new apartment buildings opening.” Bokhari also noted that while construction is expected to slow down, the market could see rents rise again, but 2025 is anticipated to be favorable for renters, potentially widening the affordability gap between buying and renting.
The report also highlighted that median asking rents for smaller units, specifically 0-1 bedroom apartments, have decreased by 1.7% year over year to $1,450 a month, marking the lowest since November 2021. Two-bedroom apartments saw a 1.1% decrease to $1,671, and rents for apartments with three or more bedrooms dropped by 2.3% to $1,955.
When analyzing the price per square foot, the decrease was more pronounced, with 0-1 bedroom apartments experiencing the largest reduction of 2.5%, followed by 3+ bedroom apartments at 2.4%, and 2 bedroom apartments at 1.2%.
Looking at regional data, Sun Belt metros have continued to see the most significant declines in median rents. Austin, TX, led the drop with a 12.4% decrease, followed by Tampa, FL (-11.3%), Raleigh, NC (-8.4%), Jacksonville, FL (-7.5%), and Nashville, TN (-7%).
Conversely, rents have increased the most in Midwest and East Coast metros, where new construction has been less prevalent compared to the Sun Belt. The largest increases were observed in Cleveland, OH (10.6%), Louisville, KY (10.2%), Baltimore, MD (9.4%), Washington, D.C. (9.4%), and Providence, RI (9.3%).
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