By: Stessa
Rents closed off the year with a 0.8% in December, marking the fourth straight month-over-month decline, according to Apartment List. Throughout the year, rents increased 3.8% overall across the country.
Source: Apartment List (January 2023) “The cooldown in rent growth is being mirrored by continued easing on the supply side of the market. Our vacancy index now stands at 5.9 percent, after more than a year of gradual increases from a low of 4.1 percent last fall. And in the past four months, this easing of the vacancy rate has picked up steam again, after plateauing a bit over the course of last summer. Today’s vacancy rate still remains slightly below the pre-pandemic norm, but is quickly approaching that benchmark.” Slowing rent growth puts downward pressure on vacancy rates. Although vacancies have been increasing since 2021, they are expected to ease into 2023 as rent growth continues to slow.
Source: Apartment List (January 2023) GlobeSt reports on a Cushman & Wakefield report that notes: “The difference between the average principal and interest component of mortgage payment and rent (widest gap in history). Typically, rents are about $65 higher than mortgage payments. Relatively, renting has never been cheaper…[But] [c]urrent average rent-to-income ratios for U.S. multifamily REITs imply renters aren’t having trouble making rental payments. 30% qualifies renters as ‘cost burdened’ by HUD.” Finally, Zachary Halaschak of the Washington Examiner reports on the factors that are putting downward pressure on rents. The first cause is the construction of new apartment buildings at record levels, which will increase supply and put downward pressure on rent growth. Secondly, rising rates are keeping many out of the home purchase market, pushing them to rentals, which increases demand. This increased demand will put upward pressure on rents and temper any significant drop in prices. One expert, Lawrence Yun, chief economist for the National Association of Realtors, believes that rent growth will remain flat in 2023.