Rent to Decline in US Cities as Markets Approach ‘Oversupply’: Real Estate Report
The latest report anticipates a continued decline in rent prices, projecting a softening trend likely to persist at least through the initial half of 2024. This projection is attributed partly to a recent surge in supply, with new apartment complexes mushrooming across rapidly expanding urban areas. Real-time data from platforms like Zillow and ApartmentList also corroborate this descent in rent growth for new apartments.
According to Zumper’s nationwide data, the cost of renting a one-bedroom unit dipped by 0.1% in 2023, with steeper drops expected in 2024 in cities where supply has managed to meet the demand, particularly across Sun Belt cities like Phoenix, Austin, and Orlando, experiencing declines ranging between 5% and 11%.
The Sun Belt cities, especially Phoenix and Austin, are witnessing a notable impact due to this trend. Texas, particularly Austin and Dallas, displays a bullish trend in introducing new multifamily housing units.
On the flip side, cities like Denver, Las Vegas, and Salt Lake City, drawing in new residents consistently, are now potentially facing oversupply concerns following significant new development. Rent markets in these Intermountain region cities might experience sharper declines compared to the national average.
An influx of new apartment units hitting the market in 2024 might offer renters an opportune time to secure better deals or upgrade to more appealing spaces. The expectation of declining interest rates next year could sway affluent renters toward homeownership, reducing competition in the luxury rental segment.
In the Midwest, cities such as Chicago, Milwaukee, and Minneapolis show signs of maintaining stable rents, quietly attracting new residents in search of an affordable and laid-back lifestyle, even if they aren’t deemed as remote-work hubs.
However, cities like New York City stand out as undersupplied zones, maintaining exorbitant median prices for both one-bedroom and two-bedroom rentals.
Despite an anticipated easing in the rental market across the 100 cities studied, housing costs remain a significant contributor to inflation. Recent data from the Bureau of Labor Statistics reveals a 0.5% uptick in rental prices from October to November and a 6.9% increase over the past year, although these increments have tapered from their pandemic-induced peaks, they still surpass pre-pandemic levels considerably.
