Renters may soon have the upper hand as a wave of new apartment construction begins hitting the housing market.
- A rise of new and vacant apartments is sending the housing market in favor of the renter as landlords will soon have to compete for tenants, according to real-estate-software company RealPage.
- The vacancy rate nationwide for apartments jumped to 5% in December, up from a record seasonal low of 2.5% the year before, according to RealPage.
- Many housing economists are saying if apartment demand does not pick back up, rent prices in the U.S. could begin falling considerably, making it the best time to find a place to rent.
Why it’s news
The last few years have been tough for renters as many landlords began hiking rent prices and limiting amenities to attempt to combat inflation woes, but the tide is turning, and many housing market analysts are saying the upcoming year will be in favor of renters.
Inflation has slowly been dropping off, and more Americans have been finding themselves with a more significant amount of money saved up, but many landlords are having a hard time finding new renters.
The vacancy rate nationwide for apartments jumped to 5% in December, up from a record seasonal low of 2.5% the year before, according to RealPage.
While many Americans find themselves with more money, they remain uncertain about the economy’s future and have been pulling back on making large financial commitments like locking themselves into overpriced rental contracts.
More than 971,000 apartment units were under construction across the U.S. at the end of last year, the second-largest number on record. Around 575,000 multifamily units are also expected to be completed this year, adding to that large number, according to RealPage.
Between the influx of new buildings and the plethora of vacant apartments, landlords will likely have to start fighting for tenets in the rental market. Many economists think that will make rental prices drop considerably.
The last few months of 2022 had “the biggest monthly declines in rent for any time of year that we had seen in our data going back to 2015,” says senior Zillow economist Jeff Tucker. “It’s a pretty major pullback by renters.”
Although it is likely many renters will see a decline in the future, it is not guaranteed. The market is ever-changing, and no price drops are ever guaranteed, but signs are pointing to the fact that 2023 will be a year that favors renters.