The third quarter of each year is historically the busiest time for apartment rentals, but demand has fallen this year, according to RealPage.
This is the first time the rental technology platform has recorded a third-quarter decline in its 30 years of tracking the metric. Demand fell by more than 82,000 units across the country, according to the report.
This is after a record number of new renters filled the apartments in the first two years of the Covid pandemic. Currently, there are more movers than residents, and household formation appears to be stagnant.
The apartment vacancy rate rose by 1% to 4.1%, but remains very low due to a previous surge in demand.
Jay Parsons, Head of Economics and Industry Principals at RealPage, said: “Inflation and economic uncertainty are having a freezing effect on key housing decisions. When people are uncertain, human nature goes into ‘wait and see’ mode. ”
Asking rents, which had already grown at a slower pace at the start of the year compared to last year, fell by 0.2% in September for the first time since December 2020 as a result of slower demand.
Rent increases in general may be keeping some potential tenants away, but the slowdown seems to be across all price points.
And current renters appear to be in pretty good financial shape overall. , increased from 94.9% in the previous year to 95.4%.
“If employment and wages remain on track and inflation moderates somewhat, it should unleash stagnant rental demand heading into the spring 2023 leasing season,” Mr. Parsons said.
That said, there is still one red flag for investors in apartment stocks. That said, apartment construction is at his highest level in 40 years. Apartment REITs have already been hit hard by rising interest rates, and increasing supply in the face of declining demand is not a good combination.
Completion of about 917,000 new units is set to peak in the second half of next year.
Carl Whitaker, senior director of research and analytics at RealPage, said: “That’s just true from coast to coast. And once the supply of apartments starts to rise, it’s unlikely that rents will accelerate again even if demand returns.”