Rents Continued to Fall on New Construction
More supply is helping ease the high demand seen during the height of the pandemic years, Realtor.com said.
SANTA CLARA, Calif.— For the 17th consecutive month, rents declined in December, falling by -1.1% year over year to a median of $1,695, according to the Realtor.com December Rental Report released today. This is the first time since April 2022 where the national median asking rent fell below $1,700, as new construction nationally continues to outpace demand.
"We are reaping the benefits of the multi-family surge in housing starts that lasted throughout 2023, but as starts and completions slow we anticipate seeing more balance in the rental market ahead," said Danielle Hale, chief economist at Realtor.com®. "For renters, balance is welcome and signals an end to the pandemic era rental market spikes."
Strong rental supply growth helps bring market closer to balance
Strong rental supply growth in recent years has returned the market to a more balanced state as the nationwide absorption rate, the share of newly built rental units that are successfully leased out within three months of completed construction, fell to 55%, in line with 2019 levels.
Absorption rate is not the only signal of a move into balanced market territory. The influx of new multi-family construction is helping bring balance to the rental market, especially when looking at the change in rents over the last five years and the inflation rate. Since 2019, overall inflation has increased 22.8%, yet rents have only increased 16% during the same time period.
Balance lags for affordable rentals
More supply is helping ease the high demand seen during the height of the pandemic years; however, absorption rates for affordable rentals show stronger demand for these properties than for more expensive ones. The weighted average absorption rates within three months of completion were 56.3% for the affordable apartments and 53.8% for the pricier units, underscoring a relatively stronger demand for affordable rental options relative to supply.
Apartments continue to fill fast in the northeast while the west saw falling absorption
Regionally the Northeast has the highest absorption rates and is the only area experiencing a higher absorption rate in the third quarter of 2024 compared to the same period last year, rising from 58% to 67%. This trend corresponds with ongoing annual rent growth in markets like New York City, where rental prices continue to climb.
The West experienced the largest decline in absorption rates within the first three months of completion, dropping from 72% for the third quarter in 2023 to 58% for the third quarter in 2024. This slowdown can be attributed to the increased supply of new rental units in the region. With more rental options available, eight out of 11 Western markets reported year-over-year rent declines, led by markets such as Denver (-5.9%); Riverside, Calif. (-4,8%); and San Francisco (-4.3%).
Methodology
Rental data as of December 2024 for studio, 1-bedroom, or 2-bedroom units advertised as for-rent on Realtor.com. Rental units include apartments as well as private rentals (condos, townhomes, single-family homes). We use rental sources that reliably report data each month within the 50 largest metropolitan areas. Realtor.com began publishing regular monthly rental trends reports in October 2020 with data history stretching back to March 2019.
Source: Realtor.com
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