Rent Prices Climb Amid Falling Apartment Construction

A recent report from Redfin highlights a slowdown in apartment construction, which has led landlords to increase rental prices, particularly in the top ten metropolitan areas.

Data from the St. Louis Federal Government indicates that new construction of privately owned, multi-unit buildings peaked in October 2023 but has been on a downward trend since then. This translates to a 45% decrease in new apartments entering the market since the pandemic construction boom.

As noted by a senior economist at Redfin, “Apartment construction saw significant growth during the pandemic, but many of those projects are now concluding, and fewer new ones are starting.” There’s definitely a shift happening. Rising construction costs and less enthusiasm from investors are causing builders to hesitate. Fewer new apartments mean that tenants have fewer choices, allowing landlords to regain some pricing power.

As of September 10th, the average rent across all property types in the U.S. is reported at $2,088.

In areas like Greater Chicago and Silicon Valley, rents have surged by more than 10% since August 2024, according to Redfin.

Looking at specific regions, here’s a snapshot of where rents have increased the most when compared to the previous year:

• Chicago Naperville Elgin, IL: $2,275 (10.7% increase)
• San Jose Sunnyvale Santa Clara, CA: $3,605 (10.6% increase)
• Philadelphia Camden Wilmington, PA-NJ-DE-MD: $2,034 (9.9% increase)
• Pittsburgh, PA: $1,739 (9.8% increase)
• Washington DC-VA-MD-WV: $2,414 (8.7% increase)
• Boston Cambridge Newton, MA: $3,121 (8.0% increase)
• Baltimore Columbia Towson, MD: $1,879 (7.4% increase)
• San Francisco Oakland, CA: $3,000 (6.9% increase)
• Seattle Tacoma, WA: $2,144 (6.3% increase)
• Providence Warwick, RI-MA: $2,354 (6.0% increase)

With a few exceptions, rent prices have generally increased across the board since August 2024. Interestingly, there have been reports of falling rent costs in Rock Georgetown, Austin Round, Louisville/Jefferson County, and Jacksonville.

Looking ahead, the immediate outlook for potential renters is less than promising.

With inflation rising in August, asking rent prices experienced their largest surge since 2022, marking three consecutive months of increase. The average asking price for 0-1 bedroom units saw the highest rise nationally, while two-bedroom apartments also noted an increase, albeit at 3.6%. Conversely, rents for larger units of three or more bedrooms remained stable according to the analysis.

Some significant monthly increases were observed in Pittsburgh (2.6%), Cincinnati (2.3%), Portland-Vancouver (2.1%), and Baltimore (2%).