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Thursday, November 02, 2023

Asking Rents Down 1.2% Year-over-year

by Calculated Risk on 11/02/2023 11:03:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Asking Rents Down 1.2% 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 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 negative year-over-year).

Recent data suggests household formation has slowed sharply and asking rents are declining year-over-year. With a near record number of multi-family units under construction, slow household formation, rising vacancy rates, and soft rents, most builders expect to start fewer multi-family units in 2024.

Case-Shiller House Prices IndicesRick Palacios Jr., Director of Research at John Burns Research and Consulting noted yesterday:
Apartment developers and investors we just surveyed expect a big drop in starts over the next 12 months.

25% expect apartment starts to fall by 50%+, and 52% expect a drop of 20%+. Very, very few expect growth ahead.
With slow household formation, more supply coming on the market and a rising rental vacancy rate, rents will be under pressure all year and multi-family starts will decline in 2024. See: Forecast: Multifamily Starts will Decline Sharply
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