The rental market is declining so quickly in some areas of the country that landlords have no choice but to offer concessions
Redfin: Rents are near record highs — yet landlords are offering perks Getty Images
It seems homebuilders aren’t the only ones offering incentives in this housing market — landlords are, too, even though the average asking rent is at a near-record level, according to Redfin.
Last month, the average asking rent in the U.S. was $2,052, just $2 below the record high set the year before, and slightly higher than $2,038 the previous month. However, landlords are finding a way to attract renters, whether it’s a one-time discount or a few free months per Redfin.
“While asking rents are near all-time highs, renters in some parts of the country are finding deals,” Lily Katz, a data journalist at Redfin, wrote in a new report published today. “As vacancies rise, some landlords are handing out one-time discounts to attract tenants while maintaining the high asking rents on paper.”
She later added that because of this, rents are actually falling in some areas, but those declines won’t show up in rental application data. Either way, the U.S. rental vacancy rate is 6.3%, according to tracking by the Federal Reserve Bank of St. Louis (which uses Census Bureau data); A year ago, it was 5.6%. Additionally, residential developments in buildings with five or more units rose nearly 29% year over year in the second quarter, according to Redfin, which Katz explained means landlords have “more vacancies to fill and less space.” To raise prices.” So, in some cases, building owners are raising rents for existing tenants but not for new tenants, Katz wrote, to boost their returns without scaring away potential tenants.
“A year ago, you weren’t really seeing franchises in the market,” John Ziglar, CEO of Rent.com, said in the report. “Fast forward to today, and they are much more common, with landlords offering one to three months free in an attempt to attract new tenants without lowering their asking rents.”
High-end real estate is under pressure in some markets as demand declines, while supply increases. At the same time, there is demand for more affordable units, as supply is tighter and consumers are less willing, or unable, to purchase high-quality units at this time. However, although rents are near all-time highs, they are no longer posting significant year-over-year jumps similar to the past two years amid a pandemic-fueled surge in demand, Katz wrote, referring to August of last year. Last year, when the average asking rent rose more than 12% year over year.
“Rent growth has slowed over the past year due to slower household formation, economic uncertainty, affordability challenges and increased rental supply,” Katz wrote.
However, the rental market varies across the country. In the West, the average asking rent fell 1.1% year over year to $2,469 in August. In the South, the average asking rent fell 0.3% to $1,673. However, the average asking rent rose 4.6% over the same period in the Midwest and 1.2% in the Northeast to $1,434 and $2,509, respectively, according to Redfin.
“The rental market has slowed quickly in the West and South in part because those markets have seen significant rent increases during the pandemic,” Katz explained, later adding that both rental markets were beginning to stabilize. “Rents rose dramatically as people flocked to Sun Belt cities including Phoenix, Miami, and Dallas. But once the rent wave subsided, rents in those areas had more room to fall. The West was also disproportionately affected by layoffs in the tech sector, which It may contribute to a soft rental market.