Redfin Reports U.S. Asking Rents Flatten After Pandemic Rollercoaster Ride
February 09 2024 - 8:00AM
Business Wire
Rents haven’t fluctuated much over the past
year, rising 1% in January–a far cry from double-digit growth
during the pandemic.
(NASDAQ: RDFN) —The median U.S. asking rent rose 1.1% year over
year to $1,964 in January, the largest annual increase since March
2023, and was unchanged from a month earlier, according to a new
report from Redfin (redfin.com), the technology-powered real estate
brokerage. While rents ticked up from a year earlier, the bigger
picture is that rent growth is leveling off after surging during
the pandemic and then rapidly slowing from mid-2022 to
mid-2023.
Year-over-year rent growth has hovered between -2.1% and +2.4%
for the past year, a much narrower range than the prior year, when
rent growth was as low as 4.8% and as high as 17.7%.
Asking rents have flattened because the pandemic moving frenzy
is over and landlords are grappling with vacancies due to a jump in
apartment supply. The rental vacancy rate was 6.6% in the fourth
quarter, tied with the prior quarter for the highest level since
early 2021. Vacancies have climbed due to a building boom in recent
years. The number of recently completed apartments is near its
highest level in more than 30 years, and the number under
construction is just shy of its record high. Redfin Chief Economist
Daryl Fairweather expects apartment completions to peak in
2024.
While rents have cooled, they haven’t yet posted significant
declines. That’s likely because high mortgage rates continue to
fuel rental demand, and because some landlords are offering
one-time concessions like a free month’s rent or reduced parking
costs to attract renters without having to lower asking rents on
paper.
Home prices are rising much faster than rents, which is also
fueling rental demand and motivating renters to stay put instead of
entering the housing market.
“There’s not a huge incentive for renters to buy right now.
Asking rents are stable, and while mortgage rates have dipped in
recent months, they haven’t fallen enough to make the financial
equation of homebuying feasible for many people,” Fairweather said.
“If you’re a renter who’s interested in buying but isn’t in a rush,
there’s not much downside to waiting for mortgage rates to fall and
your savings to grow.”
Buying may make sense for people who can afford a large down
payment and plan to stay put for at least five years, Fairweather
said. Putting 20% down helps offset the cost of elevated mortgage
rates and removes the cost of private mortgage insurance, and some
may prefer to buy now before competition inevitably heats up when
mortgage rates fall further. Of course, many Americans can’t afford
a 20% down payment, though some do qualify for down payment
assistance.
Rents Climb Fastest in the Midwest and Northeast
The median asking rent in the Midwest increased 4.6% year over
year to a record $1,437 in January. Rents also rose in the
Northeast (2.3% to $2,427) and the West (0.6% to $2,358). In the
South, rents were unchanged at $1,637. The Midwest was the only
region where rents hit a record high.
“Rent prices in Chicago are still out of control,” said local
Redfin Premier real estate agent Dan Close. “A lot of the buyers
I’m working with are people who have been pressured out of
renting–if you’re paying an arm and a leg for rent, why not try to
buy and build some equity? We’ll likely see this trend intensify in
the spring and summer, when the vast majority of leases end.”
Rents are likely holding up best in the Midwest and Northeast
because those regions haven’t been building as much as the South
and West, meaning landlords aren’t under as much pressure to fill
openings.
To view the full report, including charts and methodology,
please visit:
https://www.redfin.com/news/redfin-rental-report-january-2024
About Redfin
Redfin (www.redfin.com) is a technology-powered real estate
company. We help people find a place to live with brokerage,
rentals, lending, title insurance, and renovations services. We
also run the country's #1 real estate brokerage site. Our
home-buying customers see homes first with same day tours, and our
lending and title services help them close quickly. Customers
selling a home in certain markets can have our renovations crew fix
up their home to sell for top dollar. Our rentals business empowers
millions nationwide to find apartments and houses for rent.
Customers who buy and sell with Redfin pay a 1% listing fee,
subject to minimums, less than half of what brokerages commonly
charge. Since launching in 2006, we've saved customers more than
$1.5 billion in commissions. We serve more than 100 markets across
the U.S. and Canada and employ over 4,000 people.
For more information or to contact a local Redfin real estate
agent, visit www.redfin.com. To learn about housing market trends
and download data, visit the Redfin Data Center. To be added to
Redfin's press release distribution list, email press@redfin.com.
To view Redfin's press center, click here.
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version on businesswire.com: https://www.businesswire.com/news/home/20240209325948/en/
Redfin Journalist Services: Kenneth Applewhaite, 206-414-8880
press@redfin.com
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