There are signs that rents across America are starting to decrease after they spiked during the Covid-19 pandemic.
The real estate brokerage Redfin said rents are falling at the fastest clip since the beginning of the pandemic in response to a recent boom in construction.
Redfin said the median asking rent fell 2.1% in November compared to a year earlier. It was the steepest decline since February 2020.
‘The number of completed apartments in the U.S. rose 7% year over year in the third quarter to a seasonally adjusted annual rate of 1.2 million, one of the highest levels of the last three decades,’ the firm wrote. Redfin also said that construction starts are at one of the highest levels of recent decades, although they are slowing down.
Experts have noted in the last year that there’s been a boom in rental construction, especially in multifamily apartment buildings.
Jay Parsons, chief economist for the property management company RealPage, said landlords and builders wanted to get in after they saw demand and rental prices spiking during the early stages of the pandemic.
‘That cycle led to apartment construction jumping to the highest in 50 years,’ he told NBC News.
Now supply of homes for rent is outstripping demand, and that’s pushing prices lower. Parsons said that measurements of current rents show that in most U.S. cities, rents are flat or down over the last year.
Official U.S. government data is mixed, however. According to one of the most widely used economic indicators, the Consumer Price Index from the Bureau of Labor Statistics, rents have continued to increase in spite of the rise in construction.
Parsons said that’s because of the way the Bureau of Labor Statistics calculates rent. It surveys people about their current rents, revisiting different regions at six-month intervals.
That means the index doesn’t reflect newly offered rentals.
If a shift is coming, it’s in its early stages. Redfin said that on a national level, rents are 22% higher than they were in November 2019, and they’re just 4.2% off their August 2022 record high of $2,054 a month.
It hasn’t helped that home prices and mortgage rates have also risen a great deal, forcing more people to rent when they can’t afford to buy.
But Parsons says the continued construction will keep pushing prices downward, or keep increases small.
“For the next year, maybe 15 months or so, we’ll probably continue to have more supply than demand, which creates a favorable dynamic for renters,” he said. ‘I would expect that we’ll see in 2025 rents look more like they did pre-pandemic.’