Rent Prices Continue to Climb in May: A Closer Look at Apartment List's June Report

In its latest report, Apartment List reveals that rent prices continued their upward trajectory in May, marking the fourth consecutive month of increases. This trend was observed in 80 of the nation’s 100 largest cities. However, despite these consistent monthly gains, the broader picture for 2024 remains one of sluggish overall rent growth.

Monthly Increases Amidst Sluggish Annual Growth

According to the June report, the national median rent increased by 0.5% in May, reaching $1,404. Yet, this figure only tells part of the story. The pace of rent growth has decelerated slightly, indicating a potentially slow summer for the rental market, which typically sees a surge in activity during the moving season.

“Eighty of the nation’s largest 100 cities had rents increase in May,” the report states. Yet, on a year-over-year basis, only 43 of these cities have seen positive rent growth. This mixed picture suggests that while there are pockets of rising rents, the overall market is experiencing more subdued growth.

Seasonal Trends and Year-Over-Year Declines

Interestingly, the usual seasonal patterns of rent increases have been less pronounced, while seasonal declines have been steeper. This has resulted in apartments being, on average, slightly cheaper today than they were a year ago. Nationally, year-over-year rent growth stands at -0.8%, remaining in negative territory since last summer.

“But despite this cooldown, the national median rent is still more than $200 per month higher than it was just a few years ago,” the report notes. This highlights the longer-term trend of rising rents, despite recent slowdowns.

Rising Vacancy Rates

A key factor influencing the current rental market is the supply of new apartments. The vacancy index, which has been steadily trending upward, reached 6.7% in May—the highest level since August 2020. This increase in vacancies is expected to continue as more new units come online.

“Despite a recent slowdown in new permits being issued and new construction projects breaking ground, the number of multifamily units under construction remains near record levels. (The year) 2023 saw the most new apartments complete construction in more than 30 years, and an even greater number of new units are expected to come on the market this year,” the report explains.

This surge in new apartment construction, particularly in Sun Belt markets, is likely to provide renters with more options than they've had in recent years. However, it also means that rental prices may be moderated by the increasing supply.



Conclusion

May’s rent prices highlight a market in flux. While rents have been rising for the past four months, the overall growth for 2024 remains modest. The anticipated influx of new apartments is likely to further temper rent increases, providing renters with more choices and potentially more bargaining power.

“Rent increases are currently being moderated by a robust construction pipeline expected to deliver a decades-high number of new apartment units in 2024,” Apartment List economists conclude. While there is some optimism regarding rental demand due to improving consumer sentiment, the impact of the substantial incoming supply appears to be the dominant force shaping the market.

As we move into the summer months, traditionally a period of heightened activity in the rental market, it will be interesting to see how these dynamics play out. For now, renters can expect a somewhat tempered rental landscape, characterized by more available options and a slower pace of rent growth.