A recent boom In the housing sector, rents are stagnating and more options for tenants mean that landlords may have to make them more attractive offers.
Rents soared during the pandemic. But things have changed, and landlords and property managers are offering concessions to attract tenants – and to prevent their apartments from sitting empty, according to Zillow. Sweeteners The offers range from weekly or monthly rent-free use, lower deposits, Wi-Fi or parking fees at reduced prices to help with moving furniture into the new rental apartment.
More multifamily homes were completed in June than in any other month in nearly 50 years. This “opens up new options for renters and spreads demand across more homes,” Zillow chief economist Skylar Olsen wrote in a monthly Research report. Last month, just over 33% of rental listings on Zillow nationwide included a discount, up from about 25% of rental listings a year ago that offered some sort of discount.
Don’t be fooled, though, rents are still high, even if they’re rising at a slower rate. The typical rent rose less than half a percent in July, to $2,070. That’s a more than 3% increase from a year ago, but since the pandemic began, rents have risen over 33%. There are some differences between single-family and multifamily rents. Single-family rents rose nearly 5% year over year and 40% since the pandemic began. Multifamily rents rose nearly 3% year over year and more than 27% since the pandemic.
Still, the latest trend is a boon for renters, but not so much for landlords. And in some regions, it’s particularly acute. In six major metropolitan areas, more than half of rental listings on Zillow are discounted: Raleigh, Charlotte, Atlanta, Salt Lake City, Nashville and Austin. Austin was the only metro area where rents dropped month-over-month, while Raleigh struggles with one of the highest rental vacancy rates compared to other major cities.
On the other hand, in more competitive metropolitan areas where there has not been much slowdown, fewer listings mention concessions. San Jose, Baltimore, Milwaukee and Pittsburgh all have a lower share of rental listings. San Jose, like many other Cities in CaliforniaThere is a shortage of apartments, so lower rents, higher vacancy rates and declining demand are not usually a problem for landlords there.
Still, the market overall is nowhere near as hot as it was during the pandemic. But “rather than reflecting slowing demand, it’s more likely that the massive influx of new homes into the market is causing demand to spread across more supply,” Olsen wrote. “That’s a hallmark of a healthier market with a better balance between supply and demand.”
Half of all tenant households have already been taken into account cost-burdened in 2022, meaning they’re spending more than 30% of their income on housing. That equates to about 22 million American renters in total, according to Harvard University’s Joint Center for Housing Studies. Hopefully, this can be a step in a less expensive direction for renters. But what lies ahead depends.
“The question going forward is whether the current status quo of slow rent growth and high concessions will continue or whether rents will actually decline,” Olsen said. “The recent decline in mortgage rates could dampen rental demand as more households can afford to buy a home. A slowdown in the labor market could also contribute to falling rents.”