The second quarter saw a 6.2% decrease in asking rents for newly built units to $1,746—the lowest amount in over two years. This is supported by a recent analysis from Redfin.
Only this year’s first quarter had a greater reduction in rents—by 7.5%—than the second consecutive quarter in which newly constructed apartment rentals showed an annual decline, and the second-deepest decline in the previous five years.
A new Redfin study from the U.S. Census Bureau for newly built, unfurnished, privately financed rental apartments in buildings with five or more units, spanning back to the first quarter of 2012, indicates as much. The flats that were finished in Q1 of 2024 and either rented or not within three months of that date are measured by the most recent statistics available.
Will an Apartment Construction Boom Lead to Lower Rents?
As the number of newly built apartments increased, monthly asking rentals for new flats peaked in the first quarter of 2022 at $1,889, but have since declined. Q1 experienced an 18.7% increase in apartment completions year-over-year, representing the greatest growth in more than 10 years.
“Rents for new apartments will likely fall a little more this year, because there are still a ton of new buildings being completed,” said Sheharyar Bokhari, Senior Economist at Redfin. “With new apartments popping up everywhere, owners are competing with one another to find tenants by reducing rents and offering concessions like free parking. If you’re a renter in a market like Dallas or Nashville, where construction has been booming, there are likely deals to be found.”
According to Redfin’s Rental Tracker, overall rentals (for both new and existing apartments) plummeted 17.6% in August year over year in Austin, Texas, providing an illustration of the significant impact new construction has on asking rates. Like many Sun Belt metro areas, Austin has had some of the highest rates of multifamily housing construction in recent years; but, as supply rises and demand levels off, rents are beginning to decline.
Newly-Constructed 1BR Apartments Experience Biggest Drops in Rent
The most common type of new apartment, one-bedroom units, saw the biggest decline in rent in the second quarter, falling 9% year-over-year to $1,566. Apartments with two bedrooms had a 4.5% decline to $1,934, while those with three or more bedrooms saw a 3% decline to $2,309.
The asking rent for studio flats increased by 0.9% to $1,617. Like this month, the median asking rent for newly built studio apartments is more erratic and occasionally exceeds that of one-bedroom apartments. This is due to the fact that much fewer studios are being constructed and those tend to be found in more affluent, larger cities.
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