Some cities with high rent increases over the past few years saw a bit of correction mid-2022, including Tampa where rents dropped about 1% between April and Oct.
NEW YORK – Apartment rent hikes are decelerating as tenants and apartment seekers draw limits on how much income they can spend on rent.
Apartment List estimates that between April and October of 2022, rents slid 3% in Las Vegas, 2% in Phoenix and 1% in Tampa. All three cities saw rents increase more than 30% during the preceding two years.
Rising interest rates have cut into rental-property-investment profitability, and lower rent growth should help curtail inflation and offer some relief to tenants whose wages have not kept pace with the rising cost of renting.
Analysts suggest some markets could see a full year of negative rent growth starting sometime in 2023 if migration and new household formation continue to cool.
Meanwhile, CoStar Group calculates that nearly 500,000 new apartment units should complete construction by the end of this year, following the completion of more than 400,000 units last year.
Yardi Systems’ Jeff Adler suspects some cities with higher-than-average construction activity could see full-year rent declines. Miami, Austin and Raleigh are cited as metros that have an especially large amount of new inventory expected to open this year.
CoStar says the coming growth in new apartments is most likely to impact rents at higher-end buildings because fewer people might now be earning enough to rent them. Few housing economists expect job and wage increases to be strong enough to sustain rent hikes this year.
Source: Wall Street Journal (01/03/23) Parker, Will
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