In a striking turn of events, the third-quarter asking rents for newly completed apartments surged at the fastest annual pace seen in a year and a half, marking a reversal after two consecutive quarters of decline, as reported by Redfin. The latest real estate data shows that the median asking rent for new apartments climbed by 1.5% year over year to reach $1,802 in the last quarter, following a substantial decline of over 7% in each of the first two quarters of 2024.
This increase signifies the first instance in which asking rents for newly constructed apartments have surpassed the $1,800 threshold since late 2023. Previously, during the second quarter, the rents for these buildings had dipped to $1,714, representing the lowest level recorded since mid-2021. The recent decreases in rental prices were largely attributed to historically high completion rates subsequent to a construction boom that initiated during the migration frenzy spurred by the pandemic.
Redfin’s Senior Economist, Sheharyar Bokhari, stated, "We would usually predict that rents will stay flat, or even potentially fall, when there are so many new apartment buildings opening up. What’s interesting in the third quarter is that rents are rising by more than the national average in the West and Midwest, even after the number of new apartments spiked between 30%-50%." In stark contrast, the Northeast region saw asking rents for new apartments decline by 3.6% year over year during the September quarter, coinciding with a 13% increase in apartment completions.
Meanwhile, the West experienced a rent increase of 4.4% despite a remarkable 34% rise in completions. Rentals in the Midwest and South also saw increments of 3.3% and 1.1%, respectively, even amid a surge in completions. Bokhari indicated that the rising asking rent levels might be supported by new apartments opening in more upscale metropolitan areas within each region.
Additionally, the vacancy rate for buildings with five or more units reached 8% in the third quarter, marking the highest level recorded since the first quarter of 2021. Yet, the pace of apartment construction is beginning to taper off, with permits for new projects decreasing by 21% year over year in October, as highlighted by data from the Census Bureau..