The construction boom in the U.S. has led to a surplus of housing units, resulting in lower rents and various benefits for renters. This surge in construction activity, especially since the pandemic, has substantially increased the inventory of available units, giving renters more options to choose from. According to Zillow Group, a significant number of multifamily units were completed in June, marking the highest completion rate in nearly 50 years. As a response to this increase in supply, landlords have started offering rent concessions to attract new tenants. These concessions may include discounts, incentives, or perks such as free weeks of rent or free parking.
The data suggests that approximately 33.2% of landlords across the U.S. offered at least one rent concession in July, up from 25.4% in the previous year, indicating a substantial increase in rental incentives. With the median asking rent prices for apartments experiencing a decline in July, renters are benefiting from this shift in the market. For instance, the median rent price for studio or one-bedroom apartments dropped by 0.1% to $1,498 per month. Similarly, two-bedroom apartments decreased by 0.3% to $1,730, while units with three bedrooms or more saw a 2% decrease to $2,010.
Although rent prices remain relatively high due to the significant increase during the pandemic, the rate of growth has stabilized, presenting a positive outlook for renters. Certain metro areas in Florida and Texas, known for their construction activity, are witnessing substantial declines in rent prices. For example, the median rent price in Austin, Texas, fell by 16.9% in July compared to the previous year, the largest decrease among all analyzed metro areas. Similarly, Jacksonville, Florida, saw a 14.3% decline in rent prices during the same period. These variations reflect the impact of increased supply on local rental markets.
Historically, wage growth has been closely associated with rent growth, indicating a direct link between labor market conditions and the housing market. According to Orphe Divounguy, a senior economist with Zillow’s Economic Research team, the tightness of the labor market can serve as a predictor of housing market conditions. With the recent easing of the labor market, characterized by a higher number of job seekers than available positions, the dynamics of the rental market are expected to shift accordingly.
As wage growth continues to outpace rent growth, renters may benefit from more affordable housing options relative to their incomes. However, it is essential to consider the overall trend in wage growth, which has slowed down in recent months. While wages and salaries increased by 5.1% in June over the 12-month period, this growth rate has decelerated from its peak of 9.3% in January 2022. With wage growth returning to pre-pandemic levels, renters may face a new set of challenges in the rental market.
The construction boom in the U.S. has had a significant impact on renters, leading to lower rents, increased supply, and various benefits for tenants. As rent concessions become more prevalent and rent prices fluctuate across different regions, renters are presented with new opportunities and challenges in navigating the rental market. By staying informed about these trends and understanding the underlying factors shaping the rental landscape, renters can make more informed decisions about their housing choices.