{"id":163764,"date":"2023-12-28T06:58:08","date_gmt":"2023-12-28T13:58:08","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=163764"},"modified":"2024-01-15T05:51:31","modified_gmt":"2024-01-15T12:51:31","slug":"rents-show-biggest-decline-in-three-years","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/rents-show-biggest-decline-in-three-years","title":{"rendered":"Rents Show Biggest Decline in 3 Years\u2014Should Landlords Panic?"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC6869305126\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p>Redfin\u2019s <a href=\"https:\/\/www.redfin.com\/news\/redfin-rental-report-november-2023\/\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">November<\/a> rent report is out, showing that median rent prices declined by 2.1% year over year. This is the biggest decline since 2020, and renters nationwide will breathe a sigh of relief. Landlords and investors? Perhaps not so much, although there are regional variations that are worth exploring if you\u2019re planning on investing in real estate in 2024.&nbsp;<\/p>\n\n\n\n<p>Asking rent prices have been dropping steadily since May 2022, when the median U.S. rental price shot up to <a href=\"https:\/\/www.redfin.com\/news\/redfin-rental-report-may-2022\/\" target=\"_blank\" data-type=\"link\" data-id=\"https:\/\/www.redfin.com\/news\/redfin-rental-report-may-2022\/\" rel=\"noreferrer noopener nofollow\">above $2,000 per month<\/a>. At that point, rents were growing at a monstrous rate of 15% year over year as a result of the pandemic-induced scarcity of available rental homes.&nbsp;&nbsp;<\/p>\n\n\n\n<p>The situation now is very different. The severe supply-demand gap has been steadily closing over the past year and a half, with new construction boosting supply\u2014to the point where some landlords have been struggling to find tenants and <a href=\"https:\/\/www.biggerpockets.com\/blog\/landlords-are-offering-more-concessions-as-the-rental-market-softens\" target=\"_blank\" rel=\"noreferrer noopener\">offering rental concessions<\/a> such as the first month rent-free or free parking. The rental vacancy rate rose to 6.6% in the third quarter of 2023, the highest level since the first quarter of 2021, which was during the era of COVID pandemic restrictions.&nbsp;<\/p>\n\n\n\n\n\n\n  <div class=\"lg:block\" x-data=\"{ ad_block_block_658c6d1e1c471: popAds(1) }\">\n      <template x-for=\"ad in ad_block_block_658c6d1e1c471\">\n        <a\n          :href=\"ad.linkURL\"\n          class=\"no-underline text-black\"\n          x-on:click=\"adClicked('https:\/\/www.biggerpockets.com\/blog\/rents-show-biggest-decline-in-three-years', ad.sponsor, ad.title, ad.id, 'blockAdClicked', 'blockAd', '')\"\n          target=\"_blank\">\n          <div\n            class=\"py-4 border-b flex flex-col flex-nowrap text-sm border-t px-0 rounded-none\"\n            x-init=\"\n              analytics.track('blockAdLoaded', {\n                referrer: 'https:\/\/www.biggerpockets.com\/blog\/rents-show-biggest-decline-in-three-years',\n                sponsor: ad.sponsor,\n                ad_title: ad.title,\n                ad_page_location: ''\n              })\n            \"\n            x-intersect:enter.once=\"adViewed('https:\/\/www.biggerpockets.com\/blog\/rents-show-biggest-decline-in-three-years', ad.sponsor, ad.title, ad.id, 'blockAdViewed', 'blockAd', '')\">\n            <div><span class=\"text-xs text-slate-light block bg-slate-50 p-1 inline-block rounded-md\">Sponsored<\/span><\/div>\n            <div class=\"flex items-center text-sm space-x-4\">\n                <img :src=\"ad.imageURL\" :alt=\"ad.imageAlt\" class=\"h-10 w-10 object-cover rounded-full\">\n\n                <div clas=\"text-sm\">\n                    <span class=\"font-bold block\" x-text=\"ad.sponsor\"><\/span>\n                    <span class=\"text-slate\/80\" x-text=\"ad.description\"><\/span>\n                <\/div>\n            <\/div>\n\n            <div>\n                <span class=\"font-bold\" x-text=\"ad.title\"><\/span>\n                <p class=\"mt-2 text-slate\/80\" x-text=\"ad.body\"><\/p>\n                <span class=\"mt-2 text-themeBlue block mt-2 underline\" x-text=\"ad.linkTitle\"><\/span>\n            <\/div>\n          <\/div>\n        <\/a>\n      <\/template>\n  <\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\">More Renters, Lower Rents<\/h2>\n\n\n\n<p>The apartment building sector is gaining momentum. New construction of apartment buildings rose by 7% year over year in the third quarter of 2023 to a seasonally adjusted rate of 1.2 million. This is the highest rate in the past 30 years. New construction starts in the sector are declining somewhat, falling 26.2% year over year in the third quarter, but the overall rate of new starts that have just begun is still historically high, standing at 1.2 million.&nbsp;<\/p>\n\n\n\n<p>Redfin chief economist Daryl Fairweather interprets the data as a sign that \u2018\u2018rents have started falling in a meaningful way. Rising supply [&#8230;] means renters have more good options to choose from.\u2019\u2019<\/p>\n\n\n\n<p>Rising supply isn\u2019t the only reason why rents are falling. There are larger socioeconomic factors at play. The biggest one is, of course, the nationwide shift toward renting as a longer-term option as homeownership becomes less and less <a href=\"https:\/\/www.biggerpockets.com\/blog\/afford-invest-real-estate\" target=\"_blank\" rel=\"noreferrer noopener\">affordable<\/a>.&nbsp;<\/p>\n\n\n\n<p>Currently, 1 in 3 people in the U.S. are <a href=\"https:\/\/www.biggerpockets.com\/blog\/zillow-renter-survey-2023\" target=\"_blank\" rel=\"noreferrer noopener\">renters<\/a>; they rent for longer than before and are older than ever before. This trend toward longer-term renting is changing the status of renting from the short-term stopgap option before homeownership to more of a valid lifestyle choice. Fairweather says that \u2018\u2019with homeownership so expensive, renting has started to lose its stigma.\u2019\u2019<\/p>\n\n\n\n<p>The ongoing uncertainty about the economy is also contributing to declining rents. People are becoming more cautious about spending and a little more conservative about what they consider a reasonable amount to spend on rent than they were even a year ago.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Does This Mean for Real Estate Investors?<\/h2>\n\n\n\n<p>If you\u2019re a real estate investor and these trends are making you nervous, there is a silver lining: The rental market is not uniform, and apartment buildings represent only one segment of it. While this segment is currently on a downward trajectory, Redfin predicts that 2024 will be a good year for the single-family home segment of the rental market. That\u2019s because there aren\u2019t as many single-family homes available to rent, while demand for this type of rental is growing.&nbsp;<\/p>\n\n\n\n<p>This growth is driven mainly by millennial renters, many of whom are still priced out of homeownership but have a real need for more spacious family housing as they start and grow families. Family homes are also popular rental options for millennials who prefer working from home and sharing a house with friends.&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<p>As an investor, you should also consider the ever-prevalent regional differences in the rental market. While rental prices are declining overall, they are steadily growing in the Midwest. Rental prices in this region climbed a very healthy 4.6% year over year to an average of $1,434. Parts of the Midwest are experiencing something of a housing boom, with many renters attracted by the overall affordability of the region.<\/p>\n\n\n\n<p>It\u2019s a very simple pattern: As the economic outlook worsens and people become more aware of their spending, they look for cheaper areas to live. This migration causes rental prices to rise in the now-popular region, while the expensive areas experiencing the exodus see falling prices. Currently, all other U.S. regions are seeing these declines, following years of unprecedented rent increases during the pandemic.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Want to know the one place you should be looking at as a real estate investor right now? It\u2019s Milwaukee. This Midwestern city is seeing a robust demand for affordable rentals, partly in response to the increasing unaffordability of homeownership. Owning a unit here is a sure bet, according to local Redfin real estate agent Keisha Tally: \u201cEvery time one of my own units goes vacant, I get a ton of applicants.\u201d&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The Bottom Line<\/h2>\n\n\n\n<p>Identifying locally booming markets is a must for any investor right now, as these will continue offering opportunities for a reliable rental income in 2024 and beyond.<\/p>\n\n\n\n    \n  <div id=\"visibility-group-block_447cb34b8afb5e51e174e6af76d1fd4e\" class=\"visibility-group alignwide  hidden\">\n        \n\n<div id=\"hero-block_969c61cb14d4a83f5666ef56e270621a\" class=\"first:mt-0 hero-block py-4  alignwide   has-background has-slate-200-background-color has-text-color has-theme-gold-color\">\n    <div\n        class=\"gap-10 lg:gap-20 flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 lg:w-1\/2 \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-slate-800-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Find the Right Agent, Close the Best Deal<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:18px\">Step #1: Use Agent Finder to match with top <em><strong>investor-friendly<\/strong><\/em> real estate agents to help you find, analyze, and close your next deal.<\/p>\n\n\n\n<div id=button-custom-event-block_7a57a0939e8033e193b0c478d0798766 class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/agent\/match\" x-on:click=\"window.analytics.track(&#039;Blog Block | B2C Marketplace Agent Finder&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/rents-show-biggest-decline-in-three-years&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Find an Agent<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\"lg:w-1\/2 first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/08\/Marketplace-Blog-Blocks-Agent-v3.png\" alt=\"investor friendly real estate agent\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n  <\/div>\n  \n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n    \n  <div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n        \n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<h3 class=\"wp-block-heading my-0 tracking-tight font-extrabold has-theme-slate-dark-color has-text-color has-large-font-size\">Join the community<\/h3>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more. <\/p>\n\n\n\n<div id=button-custom-event-block_64dd2888dba9e class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/signup\" x-on:click=\"window.analytics.track(&#039;Blog Block | Acquisition | Free Membership Signup&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/rents-show-biggest-decline-in-three-years&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Sign Up<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n            <\/div>\n<\/div>\n\n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n  <\/div>\n  <\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>What&#8217;s going on here, and should landlords sound the alarm?<\/p>\n","protected":false},"author":613618,"featured_media":163766,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7382,7119],"tags":[],"class_list":["post-163764","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-rental-prices","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/163764","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613618"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=163764"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/163764\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/163766"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=163764"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=163764"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=163764"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}