The trend of declining rents could be reversed due to low multifamily permitting in the nation’s top 50 metros, according to a data analysis from Realtor.com.
Within the top 50 metros, 294,000 multifamily units were permitted in 2024, which Realtor.com said was below the 318,000 units permitted in 2020 at the peak of the pandemic. For nine of the top 50 metros, rents were up due to significantly lower multifamily permitting, including New York City, Kansas City and Detroit.
Realtor.com also noted that nine of the top 50 metros that saw more multifamily permitting in 2024 than over the previous five years wound up recording year-over-year rent price declines, most notably in Birmingham, Alabama, where rent declined 5.4% year-over-year as multifamily building permits grew by 22.1% from the average of the previous five years,
Realtor.com also observed that demand for larger rental units has grown because fewer renters are seeking to become first-time homebuyers – two-bedroom units saw an 18.3% long-term rent growth over the last five years while one-bedroom units grew 14.3%, and studio units grew at 9.7%.
“During the pandemic, rent prices surged significantly. While there has been a gradual correction, the current trend of declining rents over the past 19 months and a still-sizable number of multi-family units under construction have impacted builders’ enthusiasm for new projects,” said Danielle Hale, chief economist of Realtor.com. “The nation is short 3.8 million homes according to Realtor.com research. As builders attempt to right-size their construction pipelines amid shifting economic and policy cross currents, multifamily builders nationwide have made headway, evidenced by vacancy rates trending up. Still, the shortfall varies by market and region. The low level of permitting for multifamily housing, particularly in markets where rents are still climbing, may become a catalyst for future rent growth.”
BS, The massive amounts of illegals are not clogging up the rentals anymore.