The rental market has seen fluctuations in prices alongside the housing market this year. While an increase in inventory can help bring down prices, some renters are still struggling to keep up with the rising rental prices in new construction.
A recent report from Seattle-based brokerage Redfin highlighted a 1.5% increase in asking rents for newly constructed apartments in 2024, marking the biggest spike in 18 months.
In the third quarter of 2024, the median rent price for all apartment types reached $1,802, up from $1,714 in the second quarter. Asking rents for studio, one-bedroom, and two-bedroom apartments all saw an increase, while rents for apartments with three or more bedrooms declined.
The Midwest experienced a 3.3% increase in asking rents following a significant increase in new apartment completions, with the median rent price reaching $1,519. The South also saw a rise of 1.1%, with a median rent price of $1,773. The West, known for high market prices, had the most significant increase at 4.4%. Meanwhile, the Northeast saw a decline in rents.
Redfin noted the unusual increases in asking rents, particularly in the Midwest and West regions where new apartment completions were high.
According to Redfin Senior Economist Sheharyar Bokhari, the rise in rents despite the influx of new apartments may be attributed to the construction of more expensive units in metropolitan areas.
Another report by Redfin on rental absorption revealed that over half of new apartments built in the second quarter were rented out within three months, indicating a slight decrease compared to previous periods. The report also discussed how minimum wage workers required more hours to afford rent in many metro areas.
Realtor.com’s November Rental report further emphasized the challenges faced by minimum wage earners in affording rents, despite widespread rent declines in certain areas.
Looking ahead to 2025, Realtor.com projects a slight decline in median asking rents and anticipates some relief for renters, especially with minimum wage increases in various markets. However, the effectiveness of new construction in addressing affordability remains a topic of debate between industry experts.
As the housing market continues to evolve, the impact of new construction on rental prices remains uncertain. Only time will reveal whether new inventory will indeed provide a solution to the ongoing challenges of housing affordability nationwide.
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