Rent expected to drop in several US cities as markets near ‘oversupply’: real estate report

(NEXSTAR) – Renters may finally catch a break next year.

Of the 100 cities analyzed in Zumper’s Annual Rent Report, which was released this week, 55 have seen rent prices drop since last year. An additional 17 are flat year-over-year.

The report predicts rent prices will keep “softening,” at least through the first half of 2024.

Part of the reason for dropping prices, according to Zumper, is a recent increase in supply, as new apartment buildings and complexes keep opening in fast-growing cities. Real-time data providers like Zillow and ApartmentList also show rent growth for new apartments tumbling.

Nationwide, the cost of renting a one-bedroom dropped by a tenth of a percent in 2023, Zumper reports, but is expected to drop by larger margins in 2024 in cities where supply has caught up with demand. Sun Belt cities, from Phoenix to Austin to Orlando, have all seen one-bedroom rents drop between 5% and 11%.

“This trend is most pronounced in some of the pandemic’s most popular Zoomtowns, including
Phoenix and Austin,” reads the report. “Texas cities—especially Austin and Dallas—have been extremely bullish in bringing new multifamily developments to market.”

Outside the Sun Belt, Denver, Las Vegas and Salt Lake City have all been attracting new residents for years. Now, after lots of new development, Zumper says the rental markets may be flooded with more empty housing units than would-be renters.

“Several cities in the Intermountain region are nearing oversupply,” explains Anthemos Georgiades, CEO of Zumper. “We expect prices in these cities to fall more quickly than the national average.”

A surge in supply of brand new apartments coming online in 2024 could make it a good time for renters to find a good deal or upgrade to a nicer space.

If interest rates come down, as they are expected to next year, some well-off renters could opt to become homebuyers, meaning even less competition for luxury rentals.

In the Midwest, big cities like Chicago, Milwaukee and Minneapolis seem to have rents holding steady. “These cities aren’t necessarily remote-work darlings,” writes Zumper, “but they’re quietly attracting new residents on the hunt for a more affordable, laid-back way of life.”

On the other hand, there are places like New York City, which the rent report calls “notoriously undersupplied.” The median price of a one-bedroom there tops $4,100 and a two-bedroom is around $4,800.

While Zumper predicts an easier market is on the way for the 100 cities it studied, housing costs overall are still among the key factors lifting inflation. Rental prices rose 0.5% from October to November and are up 6.9% in the past year, according to tracking by the Bureau of Labor Statistics. Although those increases are down from recent peaks, they’re still much sharper than they were pre-pandemic.

The Associated Press contributed to this report.