BAM Key Details: 

  • A new Redfin report shows the median U.S. asking rent dropped for the third consecutive month, falling 0.8% year over year in December 2024 to $1,964. 
  • That drop follows a 2.1% annual decline in November—the largest year-over-year drop since 2020—and a 0.3% annual decline in October. 
  • By region, asking rents increased year over year in the Midwest and Northeast and fell in the West and South. 

A new Redfin report brings some good news for renters (at least those in the West and South): the median U.S. asking rent dropped 0.8% year over year in December to $1,964, falling for the third straight month. 

That decline follows a 2.1% annual drop in November—the steepest since 2020—and a 0.3% slide in October. 

Redfin-Asking-rents-fall-for-third-straight-month-December-2023

Source: Redfin

Granted, December’s annual decline was a modest one compared to the previous month. And month-over-month, December rents were only 0.2% below those of November. 

But with the increase in multifamily supply, fueled by the surge in multifamily construction in recent years, many landlords across the U.S. are seeing an increase in vacancies. And some are resorting to one-time concessions—like a free month’s rent or lower parking costs—to fill vacant units. 

That means renters are likely paying less in total on housing costs than available data would suggest. 

Other reasons rents have declined: 

  • Widespread economic uncertainty
  • Slowing household formation
  • Persistent affordability challenges

After all, the median asking rent is still just 4.4% below the record high. And as Americans perceive signs the economy is slowing, more are tightening their belts. Renters who might otherwise have upgraded to a larger rental unit are more likely to sit tight for now.

Other renters might take advantage of lower mortgage rates (compared to last October) to buy a home, thereby increasing the rental vacancy rate. 

High supply—more so than low demand—is driving rent declines. But if mortgage rates continue to drop at a fast clip in 2024, slowing rental demand could become a major driver of rent declines. That’s because more Americans would ditch the rental market to become homeowners, leaving landlords with even more vacancies.

Chen Zhao

Redfin Economics Research Lead

Compared to a year ago, there are more newly-built and under-construction apartments in the U.S. And the number of completed apartments is close to the highest level in more than three decades. The number of units under construction is just under its record high. 

Rental vacancies rose to 6.6% in Q3 2023

With the increase in the number of housing options renters have to choose from, vacancies have gone up, rising to 6.6% in the third quarter of 2023 (the most recent quarter for which this data is available), reaching its highest level since quarter one of 2021. 

Redfin-Rental-vacancies-Dec-2023

Source: Redfin

Rents go up in Midwest & Northeast—fall in West & South

Unfortunately for renters in the Midwest and Northeast, the news isn’t all good. In December, the median asking rent in the Midwest went up 3.7% year over year to $1,434. In the Northeast, that figure rose 1.7% year over year to $2,439. 

Renters in the West and South were the main beneficiaries of the slowing rental market, with the median asking rent in the South dropping 1% year over year to $1,632 and, in the West, falling 0.6% to $2,346. 

Redfin-Regional-rent-change-Dec-2023

Source: Redfin

With rents falling and vacancies rising, now is a good time to shop around or try to renegotiate your rent if your lease is up—especially if you’re a renter in the South or West.

Chen Zhao

Redfin Economics Research Lead

Rents in the Midwest and Northeast are holding up relatively well mainly because these regions have less new multifamily construction compared to the South and West, which means landlords aren’t dealing with increased vacancy rates. So, there’s less incentive to lower prices. 

The upsides? For one, renters in some of these markets may be more likely to buy a home, especially if mortgage rates drop to 6.5%, reducing monthly mortgage payments and incentivizing sellers. 

For another, that third year-over-year drop in the median asking rent could also signal a reprieve for U.S. inflation, as Byron Lazine pointed out in yesterday’s Hot Sheet.

Hopefully this will reflect in the CPI data which is going to be out Thursday morning… We have had a downward trend. We really need this to spike down sooner than later in our fight against inflation if we want the Fed to start cutting those rates… But the data that’s important in our fight against inflation, what the Fed uses, is often 6-12 months behind.

Byron Lazine