Apartment Rents Drop: July Vacancies Hit Multi-Year High
Apartment Market Faces Sluggishness Despite Construction Slowdown,Rents Stall
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New supply surge in 2023 leaves market overbuilt relative to demand,impacting rent growth.
Apartment List‘s latest monthly index, wich tracks the market back to 2017, reveals that while the frenzied pace of new apartment construction has peaked, the market remains oversupplied when measured against current demand. This imbalance continues to favor renters, with landlords still holding more inventory than at the beginning of the year.
Last year witnessed an unprecedented influx of new multifamily units, with over 600,000 units entering the market. This figure represents a substantial 65% increase from 2022 and marks the highest volume of new supply in a single year since 1986, according to Apartment List data.
Leasing Times and Rent Trends
In July, it took an average of 28 days to lease an apartment after it was listed.while this is a slight increase from June, it signifies a notable improvement from the recent high of 37 days recorded in January.Nationally, rents remained unchanged in July compared to June, with the median rent holding steady at $1,402. The report highlights that rents had peaked earlier in the year, and rent growth has now stalled during the typically robust summer moving season, a period usually characterized by the fastest rent appreciation.
Year-over-year, rents in July were down 0.8% from the same month in the previous year. After showing signs of approaching positive annual growth earlier in the year, rents have now experienced three consecutive months of decline, according to Apartment List data.
Market Indicators and Regional Variations
“All of our key indicators are pointing toward ongoing sluggishness in the multifamily rental market – rent growth is slipping and the vacancy rate is at an all-time high,” the report stated. “A return to tighter market conditions should still be on the horizon, but the outlook has been intricate by macroeconomic whiplash being caused by tariffs and other policies being pursued by the Trump management. That uncertainty appears to have modestly dampened demand during this moving season.”
Regionally, rents saw an increase from June to July in 37 of the 54 metropolitan areas with populations exceeding one million. however, less than half of these major cities are experiencing positive rent growth when compared to the same period last year. Rent declines are most pronounced in areas that were previously considered very hot markets,particularly in the South and the Mountain West regions.
Austin, Texas, currently holds the distinction of having the weakest rental market, with rents falling by 6.8% compared to July of the previous year. Denver and Phoenix are also experiencing significant rent decreases.Conversely, San Francisco is leading the nation in rent gains, with prices up 4.6% year-over-year. Other markets demonstrating strong performance include Fresno, California, and Chicago.
Future Outlook
“Even though the supply wave is receding, the number of units that hit the market in the first half of this year was still above the long-run average. With construction expected to slow further in the second half of this year and into 2026, conditions are likely to shift,” the report concluded.This projected slowdown in new construction suggests a potential shift towards tighter market conditions in the future, even though current macroeconomic factors continue to influence demand.