Driven by the new work-from-home dynamic as well as by new migration patterns, rent prices were red-hot during the first years of the pandemic for both single-family and multifamily homes.
Now different drivers are pushing some rents higher — and throwing cold water on others.
Multifamily rents in April were 0.8% lower than they were in the same month last year, according to Apartment List. Rents had to cool because a massive amount of new supply has come onto the market, with still more in the pipeline.
Apartment rents did rise on a monthly basis for the third straight month, but the growth is very small, just 0.5%. Rents usually begin to rise in the spring, and the gain this year is not only smaller than usual but smaller than the previous month’s gain. The national median rent in April was $1,396.
“This is typically the time of year when rent growth is accelerating heading into the busy moving season, so the fact that growth stalled this month could be a sign that the market is headed for another slow summer,” according to the Apartment List report.
Apartment vacancies are also climbing, at 6.7% as of March, which is the highest reading since August 2020. New multifamily building permits are slowing down, but the number of units currently under construction is near a record high, and last year saw the most new apartments hit the market in over 30 years.
Single-family rents are much stronger, up 3.4% in March year-over-year, according to a new report from CoreLogic. That annual increase, however, continues to shrink as more supply comes on the market from build-for-rent companies.
Roughly 18,000 single-family, built-for-rent homes were started during the first quarter, a 20% increase from the first quarter of 2023, according to an analysis of Census data by the National Association of Home Builders. Over the last four quarters, 80,000 such homes began construction, a nearly 16% jump from the prior four quarters.
“U.S. single-family rent growth strengthened overall in March, though some weaknesses are revealed in the latest numbers,” said Molly Boesel, principal economist for CoreLogic. “Overbuilt areas, such as Austin, Texas continued to soften, decreasing by 3.5% annually in March.”
The continued strength overall in single-family rents indicates that potential homebuyers who are priced out of the home-purchase market are choosing to rent similar alternatives, according to Boesel. Mortgage rates have risen back into the 7% range, and home prices continue to rise, making home buying less and less affordable.
Of the nation’s 20 largest cities, Seattle saw the highest year-over-year increase in single-family rents at 6.3%. It was followed by New York at 5.3%, and Boston at 5.2%. Those leading the declines were Austin, Texas, down 3.5%, Miami, down 3.2%, and New Orleans, down 1.4%.
For the first time in 14 years, however, single-family, attached properties, namely townhomes, posted a year-over-year rent decline.
“The decrease in the attached segment is being driven by a subset of markets, mostly in Florida, but including Austin and New Orleans. As multifamily apartments are being completed, some markets are gaining rental supply, which competes with the attached segment of the single-family rental market,” Boesel added.