Decrease in average rent prices signaling further market slowdown

1. The Housing Market Slowdown:

Tracking rents is like taking the pulse of the housing market. A sharp rise in 2021 hinted at the surge in household formation (remember my article from back then?). This surge, driven by the WFH trend, fueled expectations of a sharp 2023 slowdown in household formation (mostly confirmed) and potential rent decreases. Recent data confirms the slowdown, and with record multi-family construction, rising vacancy rates, and flat rents, builders are bracing for fewer starts in 2024.

2. Rents Retreat From the Peak:

For the past seven months, rents have been on a downward spiral. December saw the second steepest December decline in Apartment List’s history, following 2022’s sluggishness. Year-over-year, rents are down, a stark contrast to the 18% peak growth of 2021 and 2022. But let’s not forget, despite the cooldown, rents are still $250 higher than just three years ago.

3. Vacancy Rates Climb Again:

Remember when our national vacancy index bottomed out in October 2021? It eased for two years, but plateaued recently. December’s 6.5% is the highest since September 2020, and there’s reason to believe it will climb further in 2024.

4. Rent Trends Across Sources:

• Realtor.com: Seven straight months of decline for 0-2 bedroom properties, down -0.6% year-over-year.
• CoreLogic: Single-family rents up 2.5% year-over-year in October, 18th consecutive month of deceleration.
• Real Page: Effective asking rents inched up 0.16% year-over-year nationally, potentially leveling off.

5. The Bottom Line:

The housing market slowdown is in full swing, with declining rents, rising vacancy rates, and cautious builders. While rent growth might level off, affordability remains a concern, with significant increases since 2020. Stay tuned for further updates in this ever-evolving landscape.