Rents Still High but Landlords Offering Concessions

SEATTLE – The median U.S. asking rent in August was $2,052, just $2 below the record high set a year earlier, according to a Redfin report. It’s up slightly (0.7%) month-to-month; in July, the typical asking rent was $2,038.

In some cases, however, those high rents are “on paper” because landlords are offering one-time concessions to entice tenants. This means rents are effectively coming down in some areas even though they don’t show up in asking-rent data.

“A year ago, you really didn’t see concessions in the market. Fast forward to today, and they are far more common, with landlords offering from one to three months free in an effort to attract new tenants without lowering their asking rents,” says Redfin CEO Jon Ziglar.

“Higher-end properties are beginning to see pressure in certain markets as a significant portion of new units coming online are in the higher end and luxury segment,” he adds, though “we are still seeing a lot of competition for more affordable units due to less new supply.”

In some areas, building owners are raising rents for their existing tenants but not new tenants – a way to bolster returns without scaring off prospective renters.

Still, the rapid rise in rents during pandemic years has largely faded. Even though rents are still hovering near their all-time high, they’re no longer posting large year-over-year jumps like they were in the past two years. In August 2022, for instance, the median asking rent rose 12.3% year-to-year. Rent growth cooled over the past year due to slowing household formation, economic uncertainty, affordability challenges and a rental-supply increase.

Completed residential projects in buildings with five or more units rose 28.9% year-to-year in the second quarter, giving landlords more vacancies to fill and less leeway to raise prices. The national rental vacancy rate was 6.3% in the second quarter, up from 5.6% a year earlier. That’s just shy of the first quarter’s 6.4% rate, the highest in two years.

Rents in the South change little

Rents in the South – the area that includes Florida – remained stable in August, following only a small amount – 0.3% to $1,673 – though it’s the first decline since 2020. In the West, the median asking rent also fell – 1.1% year over year to $2,469.

By comparison, asking rents climbed 4.6% year over year to a record $1,434 in the Midwest and rose 1.2% to $2,509 in the Northeast.

The rental market has cooled quickly in the West and South, in part because those markets saw outsized rent increases during the pandemic. Rents skyrocketed as people flooded into Sun Belt cities including Phoenix, Miami and Dallas. Once the rental frenzy cooled, rents in those regions had more room to fall. The West has also been disproportionately impacted by layoffs in the tech sector, which may be contributing to its soft rental market.

While rents in the West and South have been relatively sluggish, these regions’ rental markets have started to stabilize in recent months as the impact of the pandemic price boom moves further into the rearview mirror and layoffs ease.

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