Important points
A version of this article first appeared in the CNBC Property Play newsletter with Diana Orrick. Property Play covers new and evolving opportunities for real estate investors, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large publicly traded companies. Sign up to receive future editions directly to your inbox. Apartment rents usually rise in the spring as demand increases due to the cold winter weather, but this year’s increase is unusually small. The national median rent was $1,363 in March, up just 0.4% from February, according to Apartment List. Last year’s monthly increase rate was 0.6%. Rents fell an annualized 1.7% in March, the biggest decline since Apartment List began tracking it in 2017 and surpassing the record set in the early months of the pandemic. The national median rent is currently down 5.5% from its 2022 peak. “The latest data from the Bureau of Labor Statistics shows that U.S. employers are cutting jobs, and the Iran war is driving up prices just as inflation was coming back under control,” said Chris Salviati, chief economist at Apartment List. “These factors are creating increased financial insecurity for many households, which in turn suppresses demand for housing.” At this time last year, annual rent growth looked set to turn positive for the first time since mid-2023, but a weakening labor market stalled the recovery. Vacancy rates are also extremely high, and rents are also falling. The national yield in March was 7.3%, unchanged from February but still the highest since 2017. The supply of new apartments has increased significantly over the past three years. It peaked in 2024, but is still rising and is now colliding with newly depressed demand. According to a government report, more than 600,000 new apartment buildings will be on the market in 2024, the most new supply in a single year since 1986. A separate report from CoStar company Apartments.com showed regional differences in year-over-year rent growth in March. The Midwest had the highest growth rate at 1.9%, followed by the Northeast at 1% and the Pacific at 0.7%. Rents fell 1.3% in the South and 2.2% in the Mountains compared to last year. According to a report from Apartments.com, “Apartment rent growth typically accelerates during this stage of the spring rental season, but March’s growth was modest, suggesting early season momentum is developing more slowly than in previous years.” As a result, apartment concessions also rose to their highest level in more than a decade. As of January, 16.6% of stable apartment landlords were offering concessions in the form of free rent or gift cards, according to RealPage Market Analytics. Major metropolitan markets include Austin, Texas; Phoenix and Denver have seen the steepest rent declines, while San Jose, California has seen the most pronounced rent declines. San Francisco and Chicago are seeing the biggest increases, according to both Apartment List and Apartments.com.
