When considering the choice between renting and buying today, the housing market balance continues to tip in favor of renters amid an uptick in multifamily construction, reveals Realtor.com’s September Rental Report.
Meanwhile, compared with pre-pandemic years, faster absorption rates of newly constructed apartments within the first three months after completion signal strong renter demand, particularly for lower-priced units.
“As rents ease and both home prices and mortgage rates continue to climb, it’s become more economical to rent than to buy in nearly all major markets,” says Danielle Hale, chief economist at Realtor.com. “However, even with an influx of new apartment units coming onto the market and putting a lid on rent growth, renters are claiming these new apartments faster than prior to the pandemic.”
In September, median asking rents in the 50 largest metros dropped to $1,747, down $29 from the peak seen in July 2022.
Rent prices, while still significantly higher than pre-pandemic levels, dipped on an annual basis for units of all sizes. Median asking rents for two-bedroom units dropped for the fifth consecutive month (-0.7%), followed by a fourth straight month of declines for one-bedroom units (-0.3%) and a third consecutive month for studios (-0.5%).
While an influx of new apartment units is helping drive down prices, renters are absorbing these units quickly. Last month, the annual completion rate of multifamily buildings with five or more units increased 10.1% month over month and 15% year over year.
Renters are moving particularly quickly on affordable units. The absorption rate for affordable rental units, or those renting for $1,850 or lower, was 69.8% within three months of completion. Within the same timeframe, 57.2% of those priced over $1,850 were rented.
“With a record number of new units coming onto the market driving rent prices down, those who may have given up hope of homeownership may be able to leverage more affordable rental options—including downsizing to a smaller unit or considering a roommate for the near term—to help build savings for a future home,” says Jiayi Xu, economist at Realtor.com.
Among the top 10 metros experiencing the fastest year-over-year rent growth, four are in the Midwest: Milwaukee (3.9%), Cincinnati (3.6%), Cleveland (3.2%), and Indianapolis (3%). The other six metros with the highest annual rent growth are spread throughout the South and Northeast: Louisville/Jefferson, Kentucky-Indiana (4.6%), Richmond, Virginia (4.6%), New York, (4.5%), Birmingham, Alabama (4.4%), Washington, D.C. (4.2%), and Boston (4%).
In the West, the median rent in September dropped by -3.1% compared with a year ago. Big metros such as San Francisco (-4.8%) and Los Angeles (-3.4%) continue to see some of the largest year-over-year declines.
The South is home to the top three metros with the most significant year-over-year rent declines: Austin, Texas (-7.3%), Dallas (-6.2%), and Orlando, Florida (-5.4%).
