The median asking rent increased by 0.4% year over year to $2,011 in September, the sixth consecutive month of minimal year-over-year rent changes, according to Redfin. Prior to this period, rent growth slowed significantly in response to a pandemic-driven surge in prices.
Ongoing construction in the rental sector has led to increased supply, but demand remains steady due to high mortgage rates and persistently high rental costs. Although construction has started to slow, the influx of new rentals will prevent major price hikes and instead force rents to stabilize.
The number of completed apartment buildings in the U.S. rose 32% year over year to a seasonally adjusted annual rate of 433,000 in August, the most recent month for which data is available. But the number of apartment buildings on which construction has started declined 41% year over year to a seasonally adjusted annual rate of 334,000. Building starts are a leading indicator of what’s happening in the housing market, whereas building completions are a lagging indicator.
Building may be slowing, but landlords are still facing more competition than they’re used to as new rentals continue to hit the market. Sometimes, their competition is an individual homeowner who’s renting their home out instead of selling—either because they don’t want to lose their low mortgage rate, they didn’t get a good offer, or both.