The rental landscape in the U.S. is becoming increasingly competitive, even with a record number of new apartment constructions. A recent analysis from RentCafe highlights that developers completed nearly 600,000 multifamily units in the previous year, marking the highest output since 1974 and a significant 34% increase from the year prior. Major cities like New York, Dallas, and Austin emerged as top destinations for these new rentals.
Rising Lease Renewals and Occupancy Rates
According to RentCafe’s Rental Competitiveness Index, the competition for rentals has intensified nationwide this year, largely due to fewer renters deciding to relocate. Lease renewal rates have climbed to 63.1% in the early months of the year, up from 61.5% during the same period last year. This trend is attributed to several factors, including elevated mortgage rates and the high prices prevalent in the housing market.
Additionally, occupancy rates for apartments have stabilized at 93.3%, slightly above last year’s figures. Many landlords are also opting to offer longer lease terms, which contributes to increased renewal periods and results in an average of seven applicants competing for each available unit.
Local Market Highlights
In a local comparison, Miami stands out with the highest occupancy rate in the country, making it the most competitive rental market. Reports noted that there is an average of 14 applicants per rental unit in Miami. The city has been dubbed “Wall Street South,” drawing major financial institutions and tech jobs, alongside its attractive lack of income tax and strategic location in the Americas.
The Midwest region demonstrates significant rental market competitiveness as well, with ten of the top twenty hottest rental markets located there, including suburban communities around Chicago. Other notable cities include Detroit, Lansing, Grand Rapids, Cincinnati, Milwaukee, and Minneapolis-St. Paul.
Trends in Rent Prices
After a period of declining rents, February saw a slight uptick of 0.3%—the first monthly increase following six consecutive months of declines, as indicated by data from ApartmentList. This increase typically marks the beginning of the busy rental season, and further rises in rents are anticipated throughout the summer months. It’s important to note, however, that current rent levels remain 0.4% lower compared to the same time last year.
Despite earlier record-setting rent growth in 2021 and early 2022, the national median rent has now decreased by 4.6% since its peak in August 2022, equating to a drop of $67 per month. Nonetheless, typical rents still reflect a substantial increase of 20% over January 2021 prices.
The authors of the ApartmentList report suggest that while year-over-year rent growth has been negative since June 2023, recent trends indicate a potential shift back toward positive growth in the near future.
