Tourism Hot Spots, Tech Cities Seeing Apartment Rents Fall Amid Slowest Demand Since 2009
As weakened apartment demand continues to slow rent growth nationally, new data shows rents are falling fastest in cities that are popular with tourists and tech companies.
Apartment rents fell for the third consecutive month in November, dropping by 0.59% from the previous month, according to new data from RealPage. Despite strong job growth and wage growth, RealPage’s figures put 2022 on track to have the weakest net apartment demand since 2009.
The drop in rents this November is the third-largest month-over-month dip since 2010, with the exception of the lockdown period during 2020, RealPage said. Occupancy is still high — at 95.1% nationally — but is below November 2019’s record 95.6% occupancy.
Tourism destinations in Florida’s Fort Walton Beach and Boise, Idaho, registered the largest monthly drop in rents, at around 2% apiece. Key metro areas that experienced monumental rent growth during the pandemic, including Raleigh/Durham, Austin, Charlotte, Seattle, Tampa and Denver, also saw rent declines greater than 1%.
Besides more vacation-heavy spots, metro areas affected by economic tremors in the tech sector could be in danger: San Jose had the largest month-over-month drop of all the metro areas, losing 1.7% of rent growth amid tech layoffs while neighboring San Francisco and Oakland also posted cuts of more than 1%.
“Look for further rent cuts in most parts of the country over the next few months,” wrote Jay Parsons, RealPage head of economics and industry principals, in his analysis. “Rent cuts are seasonally common in December, followed by flat to very slight growth in January and February, but the current trajectory of weak new-lease demand suggests deeper-than-normal rent cuts throughout the winter.”
Year-over-year, effective rent growth for new leases hit its lowest levels since June 2021 at 6.5% nationally, down from March this year’s 15.7% peak, according to RealPage.
Rent growth slowed to single digits year-over-year in 129 of the country’s 150 largest markets. Beyond tech destinations, desert cities like Las Vegas and Phoenix saw the most significant rent drops and the largest increase in occupancy declines. They may become the first major markets to see rents decline on a year-over-year basis, RealPage predicted.
Some markets held steadier than others, including Miami, Orlando, New York, Dallas/Fort Worth, Indianapolis and Kansas City, although RealPage said there was “no clear pattern by market.”
Last month also demonstrated the second-lowest renter turnover for any November on record, continuing this year’s steady decline in leasing traffic. But where renters are disappearing to remains a mystery to RealPage, which said it sees little evidence that renters are “doubling up to any significant degree” due to affordability issues.
The news follows a surprise drop in multifamily rent growth in Q3, when growth decelerated faster than anticipated during what is typically the busiest leasing period of the year.
The lack of movement in November and the rent declines are due to the same economic uncertainty felt by renters last quarter, according to RealPage.
"Low consumer confidence and weak household formation tells us Americans are in “wait and see” mode," Parsons wrote. "We’ve never before seen a period like 2022 where job growth and wage growth are robust, but demand for all types of housing is weak. But we’ll see."
