Rental prices have fluctuated in line with house prices in this year’s housing market. More inventory can lower prices, but some tenants are still struggling to meet the increased rents that come with new construction.
Seattle brokerage Redfin released a report this week highlighting a A 1.5% increase in asking rent for newly built properties in 2024 – the biggest spike in 18 months.
The average price reached $1,802 in Q3 2024 for all apartment types, up from $1,714 in the second quarter 2024. Asking rents for studio, one-bedroom and two-bedroom apartments each increased in Q3, meanwhile, asking rents for apartments with three or more. bedrooms are rare.
The Midwest experienced a 3.3% increase in asking rents after a nearly 50% increase in new apartment completions. The median rental price reached $1,519 – the largest increase of all regions. The South – which boasts new completions – saw a slight increase of 1.1%, with a median rent price of $1,773. The most notable increase was in the West, a region notorious for high market prices. Asking rents rose 4.4% with a 34.1% increase in new apartment completions – the second highest on the list. Meanwhile, the Northeast is bucking the trend with declining rents.
Redfin described the unusual increase in asking rents as unusual, given the boom in new apartment completions in the Midwest and West.
“We often predict that residential housing will stay low, or maybe even fall, when new apartments are opened. “What’s interesting about the third quarter is that rents rose above the national average in the West and Midwest, even after the number of new apartments increased between 30-50%,” Redfin senior economist Sheharyar Bokhari said in the report.
“This is possible due to the construction of new houses in the most expensive metros in each region, which increases the rates,” he added.
Another Redfin rental report found that more than half of new homes built in Q2 were rented within three months — the second-lowest adjusted share since mid-2020. But another rental data report from another industry executive may explain why this happened.
Realtor.com released its November Rental Report showing that low-wage workers need more hours to rent. Small-wage workers needed more hours to afford two- to zero-bedroom homes in 44 of the 50 areas — most of which are located in the same counties in the Redfin report.
Interestingly, Realtor.com also reported widespread rent reductions – which weren’t enough to help low-income workers.
“Low rents, combined with stable or increased minimum wages, have given renters a break in some metro areas this year, although many low-income earners still struggle to find affordable rent,” said Danielle Hale, chief economist at Realtor.com.
“With minimum wages expected to increase in more than half of the top 50 markets next year and an estimated 0.1% annual decline in wage earners through 2025, we expect more exemptions next year; however, new construction is still one of the biggest ways we have to help pay for it,” he added.
Realtor.com’s hopes of using innovation to increase accessibility are at odds with Redfin’s findings. If new apartment rental prices continue to rise, then rising new home prices may not help some workers. But 2025 is just around the corner, so only time will tell if new construction remains a desirable solution to housing affordability challenges across the country.
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