Another Rent Cut in November as Supply Subdues Apartment Fundamentals

Much like in October, effective asking rents for professionally managed apartments ticked down on a monthly basis in November. Rents were cut 0.4% from October to November, according to data from RealPage Market Analytics. As such, effective asking rents inched up just 0.4% in the year-ending November 2024, with change measured on a same-store basis.

November’s monthly rent cut appeared normal by historical standards as rents generally soften in the winter months, likely due to operators prioritizing occupancy during slower leasing seasons. November’s average rent cut has hovered around 0.3% dating back to 2010. November 2024’s cut of 0.4% registered just 10 basis points (bps) deeper than the long-term norm. By comparison, October and December average rent cuts of 0.2% and 0.1%, respectively. (Most rent growth is achieved during prime leasing season in the spring and summer months.)

U.S. apartment occupancy remained unchanged month-over-month in November, after ticking up at the end of prime leasing season due to strong demand, both for new and renewal leases. As of November, occupancy reached 94.8%, roughly in line with the long-term norm. Regionally, the highest supply area of the country, the South region, again claimed the lowest apartment occupancy at 93.9% in November. As usual, the Northeast claimed a characteristically high occupancy rate of 96.3% in November. In the Midwest and West, occupancy stood at 95.3% and 95.2%, respectively.

Detroit again claimed the highest annual effective rent growth in the nation among major markets. Rents in the Michigan city grew 4.0% in the year-ending November 2024. Midwest peers Kansas City, Chicago, Columbus and Milwaukee also posted annual effective rent growth among the top in the nation. Markets with generally lower inventory growth tended to rank among the top in the nation for rent growth. One exception to that has been Richmond, where both annual rent growth and annual inventory growth stood above the national norm. Richmond has captured significant housing demand of late, thanks in large part to demographic tailwinds such as strong population growth in the young adult segment. Richmond also benefits from being proximate to Washington, DC. Apartment rents in Richmond ($1,539) average about one-third less than that of nearby DC ($2,194).

Conversely, markets adding the most new apartment supply generally logged rent cuts in the last year.

Although Austin again posted the deepest rent cut in the nation among major markets in November, two indicators point toward mild stabilization in the Texas capital. November’s cut of 0.4% was the most mild monthly cut seen in Austin since May and replaced a more severe cut of 1.2% from November 2023 in the annual reading. As such, Austin’s annual effective rent cut of 7.3% in November appeared less severe than last month’s annual decline of 8.1%.

Among major markets posting the deepest rent cuts in the year-ending November, only one concurrently posted low inventory growth. In Memphis, a mild 1,100 units have been added to total inventory in the past year. However, Memphis has posted sluggish employment gains of late and has yet to recover all job losses recorded during the COVID-19 pandemic.

West Region Shows More Signs of Stabilizing

At first glance, the West appears to be the regional underperformer in terms of monthly rent change. Effective asking rents were cut 0.6% on a monthly basis in the West Region in November, which marked the deepest cut regionally. Still, that 0.6% cut replaced an even deeper monthly cut from November 2023 of 0.7%. Year-to-date, effective asking rents have grown 0.5% in the West region – a contrast from the 0.1% cumulative rent cut seen in the first 11 months of 2023. On an annual basis, rents have stagnated with no change in the West region. That was well below the growth rates seen in the Midwest (3.0%) and Northeast (2.5%) but above the rent cuts seen in the South region (-1.1%).

Within the West region, market-level storylines vary based on supply. Markets working to absorb high levels of new apartment supply – such as Phoenix, Denver and Salt Lake City – generally saw rent cuts at some of the deeper clips nationwide as of November. Meanwhile, lower supplied, coastal markets in the West – such as San Jose, San Francisco and Seattle – easily posted rent growth above the national norm. Riverside and Portland posted annual effective rent growth approximately in line with the national average as of November.