In a surprising turn of events, it seems that landlords are following the footsteps of homebuilders and offering incentives in the current housing market. Despite the median asking rent reaching near-record highs, landlords are finding ways to attract renters through discounts and concessions. This trend is highlighted in a recent report by Redfin.
According to Redfin, the median U.S. asking rent in August was $2,052, just $2 below the record high set the previous year. While rents remain high, landlords are offering incentives to entice renters. This could include one-time discounts or a few months of free rent. It appears that landlords are trying to strike a balance between maintaining high asking rents while attracting tenants through attractive deals.
Although these concessions are effectively bringing down rents in some areas, the declines may not be reflected in asking-rent data. The rental vacancy rate in the U.S. currently stands at 6.3%, a significant increase from the previous year. Additionally, there has been a nearly 29% year-over-year rise in finished residential projects with five or more units in the second quarter. This means that landlords are facing more vacancies and less flexibility in raising prices.
Rent.com’s CEO, Jon Ziglar, noted the shift in the market, stating that concessions were rare a year ago but have now become more common. Landlords are offering one to three months of free rent to attract new tenants without lowering their asking rents. This strategy allows them to maintain their returns while still attracting potential renters.
The rental market is experiencing varying conditions across different regions of the country. In the West, the median asking rent dropped 1.1% year-over-year to $2,469 in August. In the South, it decreased by 0.3% to $1,673. However, the Northeast and Midwest saw increases of 1.2% to $2,509 and 4.6% to $1,434, respectively.
Redfin’s data journalist, Lily Katz, explained that the rental market in the West and South has cooled after experiencing significant rent increases during the pandemic. The rental frenzy in cities like Phoenix, Miami, and Dallas led to a surge in rents. However, as the market stabilized, there was room for rents to fall. The West, particularly impacted by layoffs in the tech sector, has also contributed to a softer rental market in the region.
Overall, while rents remain near their all-time high, their growth has slowed down compared to the last two years. Slowing household formation, economic uncertainty, affordability challenges, and an increase in rental supply have all contributed to this trend. Landlords are adapting to the current market conditions by offering concessions to attract tenants without lowering their asking rents.