In February, the United States saw a notable shift in the rental market as asking rents marked their first increase on an annual basis in six months, a trend driven by robust demand, as highlighted by the latest report from Redfin. The median asking rent climbed by 0.4% year over year, reaching approximately $1,607 last month, which also signals the most significant spike in nine months.
This increase follows a 0.6% uptick from January, further emphasizing the growing pressures in the rental market. Sheharyar Bokhari, a senior economist at Redfin, remarked, "The era of big rent declines is over for most of the country." The current market conditions have led to a surge in the number of new apartments entering the market, bolstered by high demand stemming from the escalating costs associated with home purchases.
The dynamics indicate that demand may soon outpace supply, especially as apartment construction has begun to decelerate. Bokhari warned that this sluggish construction might lead to rising rents and a decrease in rental incentives—like complimentary parking—that have become customary for renters. Over the past ten months, asking rents had remained relatively stable, contrasting sharply with the volatility observed in previous years where rental prices surged by as much as 18% due to pandemic-related shifts in demand.
According to the real estate brokerage, "Asking rents are now flattening because rental supply and demand are near equilibrium." In a parallel analysis, Redfin reported that less than half—approximately 47%—of newly constructed apartments completed in the third quarter of 2024 were rented within three months.
This statistic coincides with the lowest recorded share aside from the initial outbreak of the pandemic, marking a continuation of challenges in the leasing sector. Bokhari stated, "Builders are slowing their roll, with permits to construct apartments down almost 10% year over year." This decline in construction permits indicates that renters may face a dwindling selection of apartments in the near future, potentially empowering landlords to increase rental prices.
However, such adjustments might not manifest until well into the next year, as numerous apartments built during the pandemic continue to come onto the market..