The Realtor.com September Rental Report revealed the housing market balance continues to tip in favor of renters amid an uptick in construction rates of multi-family homes, which helped push down rents for 0-2 bedroom properties (-0.7%) for the fifth consecutive month. Meanwhile, compared to pre-pandemic years, faster absorption rates of newly constructed apartments within the first three months after completion signal strong renter demand, particularly for lower-priced units.

In September, median asking rents in the 50 largest metros dropped to $1,747, down $29 from the peak seen in July 2022. Rent prices, while still significantly higher than pre-pandemic levels, dipped on an annual basis for units of all sizes.

"As rents ease and both home prices and mortgage rates continue to climb, it's become more economical to rent than to buy in nearly all major markets," said Danielle Hale, Chief Economist at Realtor.com^®. "However, even with an influx of new apartment units coming onto the market and putting a lid on rent growth, renters are claiming these new apartments faster than prior to the pandemic. Those considering new housing options will want to do their research on their desired neighborhoods, determine their priorities, and set their budget well ahead of time if possible, so they're ready to move quickly when the time comes."

September 2023 Rental Metrics by Unit Size – National

Rent prices continue downward trend for units of all sizes

In September 2023, rental affordability continued to improve, although rent prices remained well above pre-pandemic levels. Median asking rents for two-bedroom units dropped for the fifth consecutive month (-0.7%), followed by a fourth straight month of declines for one-bedroom units (-0.3%) and a third consecutive month for studios (-0.5%). Median asking rents for larger units remain the most elevated from pre-pandemic levels, with two-bedroom units renting for $403 more per month than they did four years ago. Meanwhile, rents for studios are dropping at a slightly faster pace year-over-year than larger one-bedroom units.

As inventory rises nationwide, renters quickly claim affordable units

While a near-record-high number of new apartment units coming into the market is helping drive down rent prices, these units are being absorbed swiftly by renters, signaling robust rental demand. In September 2023, the annual completion rate of multi-family buildings with five or more units increased 10.1% month over month and 15.0% year over year. Renters are moving particularly quickly on affordable units. The absorption rate for affordable rental units – those renting for $1,850 or lower, approximately 30% of the median household income – was 69.8% within three months of completion. Within the same timeframe, 57.2% of those priced over $1,850 were rented.

As renters across the country move more quickly on new multifamily construction, absorption rates within three months after completion (for apartments built in the first quarter of 2023) exceeded pre-pandemic levels in all four regions. The Midwest experienced the most significant increase in absorption rates within this window, likely due to greater affordability, although increasing demand may begin to erode those savings.

More affordable Midwest metros lead growth in rent prices

Among the top 10 metros experiencing the fastest year-over-year rent growth, four are in the Midwest: Milwaukee(3.9%), Cincinnati (3.6%), Cleveland (3.2%), and Indianapolis (3.0%). The other six metros with the highest annual rent growth are spread throughout the South and Northeast: Louisville/Jefferson, Ky.-Ind. (4.6%), Richmond, Va. (4.6%), New York, (4.5%), Birmingham, Ala. (4.4%), Washington, DC (4.2%), and Boston (4.0%).

In the West, the median rent in September dropped by -3.1% compared to a year ago. Big metros such as San Francisco(-4.8%) and Los Angeles (-3.4%) continue to see some of the largest year-over-year declines. Interestingly, the West also saw a higher absorption rate for new apartments, which may be driven by a growing demand for newer, more affordable apartments, rather than an increase in overall demand.

The South is home to the top three metros with the most significant year-over-year rent declines: Austin, Texas (-7.3%), Dallas (-6.2%) and Orlando, Fla. (-5.4%). Austin, a prominent tech hub, saw the greatest decrease in median asking rents compared to the previous year, similar to its counterparts in the West. Rent price trends in Dallas and Orlando, areas that also experienced tech growth during the pandemic, closely resemble their western tech peers.

"With a record number of new units coming onto the market driving rent prices down, those who may have given up hope of homeownership may be able to leverage more affordable rental options – including downsizing to a smaller unit or considering a roommate for the near term – to help build savings for a future home," said Jiayi Xu, Economist at Realtor.com^®. "Households considering their next move can tap into tools like the free Realtor.com^® rent or buy calculator to help weigh their options."