Us apartment rents fall for third consecutive month in November

In November, apartment rents across the U.S. had a third consecutive monthly decline, signalling a further cooling down in the U.S. housing market.

Demands for new leases fell by 0.59% in November, the third-largest monthly cut since 2010 outside of the Pandemic-altered months of April and May 2020, according to the latest data from real estate platform RealPage.

In a release, Jay Parsons, head of the Economics Industry for RealPage, said that while rents typically dip this time of year, this isn't just normal seasonality in 2022.

On a year-over-year basis, the national effective rent growth for new leases came in at 6.5%, the lowest since June 2021, and down from the peak of 15.7% in March 2022, according to RealPage.

Parsons said that the biggest factor weighing on rents today is a lack of new household formation, not renters swapping a rental for a purchase. According to RealPage's data, renter turnover in November came in at the second-lowest level on record.

Inflation and economic uncertainty are having a freezing effect on major housing decisions. Parsons wrote that when people are uncertain, human nature is to go into 'wait and see' mode. The housing surge in 2021 was caused by household formation but appears to have frozen earlier this year, so net new housing demand is dependent on household formation. Declines in asking rents come as apartment occupancy has fallen below pre-pandemic levels due to weak new leasing demand, according to the report. As of November, occupancy was 95.1%, down from the previous level of 95.6% in the year 2019.

Leasing traffic among potential tenants fell to the lowest level for the month of November last month, with prospective lease traffic falling to the lowest level for the month of November.

We have never seen a freeze in the new-lease apartment demand during a period of solid job gains like this one this year, according to Parsons. We have the weakest net apartment demand since 2009 and we are on track to end 2022 with the weakest net apartment demand since 2009. The biggest pullback is in the cities that saw the fastest growth in rents in 2021.

Destination hotspots like Fort Walton Beach, FL and Boise, ID saw asking rents fall around 2% month-on-month, and RealPage notes Las Vegas and Phoenix are poised to become the first major metros to see year-over-year rent drops as we head into 2023.