Condominium rents have been cooling off sharply for a number of months, they usually seem like they’re about to go unfavorable in contrast with a 12 months in the past.
Rents in August had been simply 0.28% larger than August 2022, in keeping with actual property tech platform RealPage. Examine that to a 12 months in the past, when rents had been posting 11% annual development. Except for a really temporary drop throughout the Covid lockdowns, rents haven’t proven unfavorable annual development in nicely over a decade. Once they did, it was resulting from a recession hitting demand.
That’s not the case now. Condominium occupancies nationally are at a fairly wholesome 94%, which is correct alongside historic norms. Excessive mortgage charges mixed with excessive residence costs and tight provide have stored extra would-be consumers within the rental market. The difficulty as a substitute is only a large quantity of residence provide.
The variety of new items being constructed is at a 50-year excessive, with greater than 460,000 being accomplished this 12 months alone. Over one million new items have been constructed prior to now three years. That is a report, and far of that provide is on the upper finish. Renters have extra choices, so landlords have much less pricing energy as turnover will increase.
Whereas rents nationally have not gone unfavorable but, they’ve in a number of native markets. Austin, Texas (-4.9%), Phoenix (-4.9%), Las Vegas (4.7%), Atlanta (-3.7%) and Jacksonville, Florida (-3.4%) are seeing the most important drops.
The Midwest and Northeast areas proceed to see very robust hire will increase. One exception is New York, the place rents had been up simply 1.9% yearly as important provide comes available on the market.
Trying forward, provide ought to stay excessive by subsequent 12 months, which is able to push rents decrease probably by 2025. New building, nonetheless, has dropped sharply this 12 months due to financing and different challenges, so there must be far much less provide going into 2026, giving rents an opportunity to make up some floor.