Will Rental Costs Come Down as Supply Surges?

Multifamily construction rose to a 50-year high in the last two years, and according to Forbes, new apartment construction also reached a historic peak this year with 420,000 new units expected nationwide. For the past several years, single-family rental prices have risen at a steady pace amid persistent inflation and a widening inventory shortage, and housing experts say a major cooldown isn’t likely in the near future.

Instead, demand is rising as remote work becomes more permanent for a growing number of professionals, but a lack of supply is forcing those apartment hunters to dish out more money for available units, making the single-family market not just competitive for renters, but also for real estate investors.

While inflation appears persistent, there may be a lag until it filters through the economy as a whole and shows up in core statistics and in people’s lives. Despite what things looked like at the beginning of the year, the economy appears to be resilient and robust and looks like we are on path to a soft landing. However, there is a fundamental undersupply of available housing, which in turn keeps rental prices up, especially for single-family homes. Until there is more inventory, it’s hard to see single-family rental prices coming down too much.

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