But the costs vary widely by location
of ConsumerAffairsAfter a surge in apartment construction, various data this year showed the cost of rent was declining while home prices continued to rise. But, in a surprising turn for the U.S. rental market, asking rents for newly constructed apartments have risen by 1.5% in the third quarter of 2024, marking the largest year-over-year increase in 18 months.
According to a newreport by real estate brokerage Redfin, the median rent for these new apartments has climbed back above $1,800, reaching $1,802. This rebound follows two quarters of significant declines, where rents fell by more than 7%, hitting a low of $1,714 in the second quarterthe lowest since mid-2021.
However, the rental landscape varies significantly across regions, and even housing markets. The Northeast experienced a 3.6% decline in asking rents, despite a 13% increase in new apartment completions, the highest since late 2022.
The West saw the most substantial rent increase at 4.4%, alongside a 34.1% surge in new apartment completions. The Midwest reported a 3.3% rise in rents following a 47% increase in new apartments, while the South, which saw nearly as many new completions as the other regions combined, recorded a modest 1.1% rent increase.
Location may be a big influence
Redfin Senior Economist Sheharyar Bokhari noted the unexpected rise in rents despite the influx of new apartments, attributing it to construction in more expensive metropolitan areas.
"We would usually predict that rents will stay flat, or even potentially fall, when there are so many new apartment buildings opening up," Bokhari said. "This is likely due to more new apartments being built in more expensive metros in each region, pushing the overall levels up."
A separate Redfin report highlights a slowdown in the absorption rate of new apartments, with just 52% rented within three months of completion in the second quarter. This rate, the second-lowest since mid-2020, reflects a return to pre-pandemic levels of 50-55%, as the market adjusts to the construction boom that followed pandemic-driven demand spikes.
The national rental vacancy rate for buildings with five or more units reached 8% in the third quarter, the highest since early 2021, indicating that supply continues to outpace demand, which ordinarily would lead to lower rent. However, construction is slowing, with Census data showing a nearly 20% decline in new apartments under construction and permits issued compared to the previous year.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-12-18 14:10:45
