Seasonally Normal Rent Cut Appears in October

Effective asking rents for professionally managed apartments inched up just 0.3% in the year-ending October 2024, with change measured on a same-store basis. Annual rent growth in the U.S. apartment market has remained mild – at no more than 0.4% – for the past 14 consecutive months, according to data from RealPage Market Analytics.

Effective rents declined 0.4% on a monthly basis, which is very similar to the monthly rent cut of 0.6% seen one year ago in October 2023. As we near the end of the calendar year, it’s common for rents to be cut in the colder months as fewer renters move and operators focus more on preserving occupancy and keeping units full.

Year-to-date rent change – which removes seasonally normal rent cuts from late 2023 – indicates rents have grown 1.3% nationally in the first 10 months of 2024.

At the same time, median rent-to-income ratios continue to tick down as wage growth outpaces inflation. The national median rent-to-income ratio for professionally managed apartments hovered at 22.5% in October, calculated on a trailing 12-month basis. That rate has been consistently ticking down over the last two-plus years as wage growth has begun to outpace inflation.

Renewal conversion continued to trend up. Just over 54% of expiring leases were renewed nationally as of October, calculated on a trailing 12-month basis.

Apartment occupancy remained stable month-over-month, after ticking up at the end of prime leasing season to stand closer to historically normal levels. As of October, U.S. apartment occupancy stood at 94.8%. Regionally, the highest supply area of the country, the South region, again claimed the lowest apartment occupancy at 93.9% in October. As usual, the Northeast claimed a characteristically high occupancy rate of 96.2% in October. Occupancy stood at 95.4% and 95.2% in the Midwest and West, respectively.

As has been the case for several months, markets posting rent growth higher than the national norm tend to be low supplied, mostly Midwest markets. Detroit claimed the highest growth in effective asking rents in the year-ending October at 4.1%. Meanwhile, Detroit has experienced mild inventory growth of less than 1% in the last year. Other markets in which rent growth ranked among the highest in the nation included Richmond, Washington, DC, Chicago and Kansas City.

Inversely, the highest supplied markets are generally cutting rents at the deepest clip. Austin, which has been experiencing a years-long supply wave, logged rent cuts of 8.1% in the year-ending October, ranking as the deepest cut in the nation among major markets. Neighboring San Antonio ranked as the next-to-last market with a price cut of 4.7%. Other supply leaders that with deep rent cuts in the last year included Phoenix, Raleigh/Durham, Jacksonville and Atlanta, all with rent cuts deeper than 4%.

Rebounding Performance in (Some) West Region Markets

After being harder hit by the pandemic, West region apartment markets have generally underperformed national norms over the last year or two. Particularly in tech-heavy markets such as Seattle and San Francisco, both rent and occupancy performance has trailed, despite also largely avoiding acute supply pressure.

More recently, the West region claims the most balanced supply and demand relationship nationwide. Though the West has the second highest inventory growth rate nationally, growing 2.3% in the year-ending 3rd quarter 2024, demand fell just 5% short of new supply. The South grew total inventory 3.9% concurrently and had a supply and demand delta of more like 17%.

October data begins to tell a story of rebounding performance among some of those coastal West region markets. San Jose ranked #9 in the nation among major markets for annual effective rent growth in October. At the same time, job growth in San Jose, while uninspiring at first glance, is once again reporting above average gains in the tech sector, which is predominantly housed within the Professional and Business Services sector, per the Bureau of Labor Statistics.

Other coastal (or near coastal) West markets such as Seattle, Sacramento and San Francisco all reported annual rent growth between 1.2% and 1.5% in the year-ending October. By contrast, some of the inner West region markets continue to post deep rent cuts, including Phoenix (-4.5%), Denver (-2.7%) and Salt Lake City (-2.5%). Unsurprisingly, those three desert and mountain markets have all been supply hot spots. In the last year, Salt Lake City has grown total apartment inventory 6.1%, among the highest rates nationally. Phoenix and Denver grew total inventory 5.6% and 5.1%, respectively, over the same period. Nationally, apartment inventory grew 2.8% in the last year.