BAM Key Details:

  • According to a new Redfin report, asking rents across the U.S. are flattening as rental supply catches up with renter demand and vacancies rise. Continued rent increases in the Midwest and Northeast offset significant drops in Sun Belt metros. 

A new Redfin report shows an overall flattening of asking rents in April as rental supply catches up with demand and landlords face a surge in vacancies.  

The median U.S. asking rent climbed just 0.3% year over year to $1,967—marking the 11th straight month of slowing rent growth. Compare that to a revised rent increase of 1.4% for March and a 16% increase for April 2022. 

Redfin-Median-asking-rent-was-1967-USD-in-April-chart

Source: Redfin

Month over month, the median asking rent dropped 0.2%, defying the seasonal trend that typically drives rents up at this time of year. 

The homebuilding boom over the last 15 years has created a surplus of new rentals on the market—and with it a rise in vacancies. 

Completed residential projects in buildings with five-plus units rose 60% year over year in March (the most recent month for which this data is available) on a seasonally adjusted basis to 484,000. The rental vacancy rate climbed up to 6.4% in the first quarter of 2023—its highest level in two years. 

Redfin-Rental-vacancies-hit-highest-level-in-2-yrs-chart

Source: Redfin

The balance of power in the rental market is tipping back in tenants’ favor as supply catches up with demand. That’s easing affordability challenges and giving renters a little wiggle room to negotiate in some areas. The market has become more balanced, but the scales could tip back in favor of landlords if homebuilders pump the brakes on new construction in response to slowing rent growth.

Taylor Marr

Redfin Deputy Chief Economist

Another factor behind the slowdown in rent growth is the number of people opting to postpone their move (temporarily or indefinitely). 

For these consumers, four reasons behind this decision stand out: 

  • Economic uncertainty
  • Slowing household formation
  • Still high rents in many markets
  • Inflation driving up the cost of other goods and services

Another likely reason is the abundance of confusing and misleading headlines, causing many consumers to feel uncertain about moving forward as a buyer or seller. 

Rents declined across the Sun Belt

Metros across the Sun Belt experienced a cooling rental market in April. In fact, all but two of the 10 metros with the biggest rent declines are in the Sun Belt. 

  1. Austin, TX (-14.3%)
  2. Phoenix, AZ (-9.6%)
  3. Las Vegas, NV (-7.1%)
  4. Oklahoma City, OK (-6.4%)
  5. Chicago, IL (-6%)
  6. Birmingham, AL (-4.5%)
  7. Sacramento, CA (-4%)
  8. Memphis, TN (-3.6%)
  9. Seattle, WA (-3.2%)
  10. Dallas, TX (-2.8%)

The pandemic brought a flood of remote workers to the Sun Belt in search of more affordable housing and warmer weather, driving up rents as well as home prices. Now, as rental supply catches up to demand, rents are dropping. 

Many of the houses built in recent years are in the Sun Belt. In March, the top five metros with the highest numbers of multifamily building permits included Phoenix and Austin. 

A lot of renters took on roommates or moved in with family when rents increased dramatically during the pandemic, which left more rentals and fewer renters needing places. Landlords who increased prices too quickly are now feeling the impact as the market calms and rents decrease to more reasonable levels.

Van Welborn

Redfin Premiere agent in Phoenix

The short-term rental market is also slowing thanks to an oversaturation of Airbnbs and new, tighter restrictions on rental hosts across the U.S. 

For landlords in Phoenix, the silver lining is that seasonal renters who head down to Phoenix for the winter will still pay a premium for their stay. That and the local job market remains strong, thanks in part to the large new semiconductor plant moving in. 

April rents kept climbing in the Northeast and Midwest (and parts of the South)

While rents deflated in the Sun Belt, they rallied in other markets that didn’t see an outsized influx of buyers during the pandemic. Providence, RI, ranked number one among the metros in Redfin’s study for seeing the biggest annual increase in asking rents. 

Five of the top ten metros with the biggest increases in asking rents are in the Midwest. Many markets in this region have done relatively well because their pricing has remained consistently affordable compared to pandemic boomtowns like Phoenix and Austin.  

Unlike Sun Belt and Western metros, midwestern ones haven’t seen huge waves of buyers moving in or out, so they haven’t experienced the booms and busts of these areas. 

Here are the top ten metros with the biggest increases in asking rents: 

  1. Providence, RI (+16%)
  2. Raleigh, NC (+12.4%)
  3. Indianapolis, IN (+10.9%)
  4. Charlotte, NC (+10.5%)
  5. Cleveland, OH (+9.7%)
  6. Columbus, OH (+8.3%)
  7. Kansas City, MO (+8%)
  8. Milwaukee, WI (+8%)
  9. Pittsburgh, PA (+7.9%)
  10. Nashville, TN (+7%)

Read the full report for more details. 

Takeaways for real estate agents

Both buyers and sellers need clarity on their local housing market before they can make a move with confidence. As a real estate professional, you can be their best educational resource, providing all the data and information they need to make informed decisions. 

Be honest with every client about their current situation and whether it makes more sense for them to buy a home in their current area or to wait until an important factor in that decision is no longer in flux—like where their next job will be and whether or not they can work remotely.

Get clear on the full picture of their situation so you can see what path would benefit them most and guide them to it.