After showing resiliency in recent years, the U.S. apartment market saw the return of mild annual rent cuts in August as occupancy softened.
U.S. apartment occupancy eased a bit to 95.4% in August, according to data from RealPage Market Analytics. That was down 10 basis points (bps) from the July showing but still matched the market’s five-year average. Year-over-year, occupancy was up 130 bps.
As a result of fading occupancy, effective asking rents were down in the year-ending August, for the first time since the COVID-19 recession. Prices fell 0.2% year-over-year across the U.S. Annual price increases have been negligible for a while now, but this is the first tine annual rent cuts have emerged since March 2021.
The South and West regions were responsible for much of the decline in the nation’s rents in August. Price declines are nothing new for the South region, as this part of the country has seen extreme supply volumes in recent years, leading to caution among operators. In fact, the South hasn’t seen annual rent growth since mid-2023. The West region also saw annual rent cuts deepen in August, pulling the national performance down.
South and West Region Markets See Weakness
All the major markets that saw rent cuts during the past year were in the South and West region of the U.S.
Some of these were markets that depend on tourism, such as Orlando and Las Vegas. Softness in tourism-dependent markets can be an early sign of economic weakness as consumers tighten discretionary spending on travel.
Other markets that continue to see deep rent cuts are supply-heavy areas like Austin, Denver, Phoenix, Dallas and Charlotte.
Markets with the Most Rent Growth
On the other hand, tech-heavy coastal markets like San Francisco, San Jose and New York continued to rank among the largest 50 apartment markets with the most rent growth, with prices climbing 3% to 7% in the year-ending August.
Other markets with big rent growth in the past year included Chicago, Pittsburgh and Minneapolis.
