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Wednesday, July 05, 2023

Asking Rent Growth Flat Year-over-year

by Calculated Risk on 7/05/2023 08:34:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Asking Rent Growth Flat Year-over-year

A brief excerpt:

Tracking rents is important for understanding the dynamics of the housing market. For example, the sharp increase in rents helped me deduce that there was a surge in household formation in 2021 (See from September 2021: Household Formation Drives Housing Demand).

The surge in household formation has been confirmed (mostly due to work-from-home), and this also led to the supposition that household formation would slow sharply in 2023 (mostly confirmed) and that asking rents might decrease in 2023 on a year-over-year basis (now flat year-over-year).
Here is a graph of the year-over-year (YoY) change for these measures since January 2015. Most of these measures are through May 2023, except CoreLogic is through April and Apartment List is through June 2023.
Case-Shiller House Prices IndicesThe CoreLogic measure is up 3.7% YoY in April, down from 4.3% in March, and down from a peak of 13.9% in April 2022.

The Zillow measure is up 4.8% YoY in May, down from 5.3% YoY in April, and down from a peak of 17.0% YoY in February 2022.

The ApartmentList measure is flat at 0.0% YoY as of June, down from 1.0% YoY in May, and down from a peak of 18.2% YoY November 2021.
With slow household formation, more supply comes on the market and a rising vacancy rate, rents will be under pressure all year. Although asking rents increased in June according to ApartmentList, “rent growth is gradually declining at a time of the year when it’s normally picking up steam”.

Since rents increased sharply last year in July, asking rents will likely be down YoY in the next ApartmentList report.
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