The median asking rent in August was $2,052, just $2 below the record high set a year earlier. Instead of cutting rents, some landlords prefer to throw in one-time concessions to attract renters as vacancies rise, according to a new report from Redfin.
“A year ago, you really didn’t see concessions in the market. Fast forward to today, and they are far more common, with landlords offering from one to three months free in an effort to attract new tenants without lowering their asking rents,” said Rent. Chief Executive Officer Jon Ziglar.
Meanwhile, some building owners are raising rents for existing tenants but for not new tenants to bolster returns without scaring off prospective renters.
In other words, rents are effectively coming down in some areas even though the declines don’t show up in asking-rent data.
Additionally, annual single-family rent growth eased for the 14th consecutive month in June, according to CoreLogic. Rent growth cooled over the past year due to slowing household formation, economic uncertainty, affordability challenges and an increase in rental supply, said the report. However, rents still hover near all-time high.
In the second quarter of 2023, the national vacancy rate was of 6.3%, up from 5.6% a year earlier. In the first quarter of 2023, the rate was of 6.4%, the highest in two years. In such a context, landlords have more vacancies to fill and less leeway to raise prices. Simultaneously, completed residential projects in buildings with five or more units rose 28.9% year over year in the second quarter, the most recent quarter for which data is available.
Rents fall in the West, rise in the Midwest and Northeast
In the West, the median asking rent fell 1.1% annually to $2,469 in August. And in the South, it fell 0.3% to $1,673, the first decline since 2020.
The rental markets in the West and South cooled quickly after the frenzy of the pandemic, when people flooded into Sun Belt cities including Phoenix, Miami and Dallas. As a result, rents in those regions had more room to fall.
Also noteworthy, the West has been disproportionately impacted by layoffs in the tech sector, Redfin economists noted. By comparison, asking rents climbed 4.6% year over year to a record $1,434 in the Midwest and rose 1.2% to $2,509 in the Northeast.