“Renters today must earn $66,120 to afford the median priced apartment,” a new analysis from Redfin reports.
That is $11,408 more than the typical U.S. renter earns, Redfin estimated. Even though apartment oversupply is holding rents down in some areas, it found the median U.S. asking rent rose 0.8% year-over-year in May this year. “Demand from renters who can’t afford to buy their own homes is keeping rents near their record high.”
Despite the demand, fewer than one in two newly constructed apartments completed in 4Q2023 were rented within three months, compared to 60% the previous year. The recent figure “is the lowest seasonally adjusted share on record” apart from 1Q2020 when the pandemic upended the housing market. The national rental vacancy rate has held at around 6.6% over the past nine months – the highest level since 2021.
Redfin attributed the slow pace of renting to the glut of units seeking tenants, despite a sharp cutback in new starts. In 4Q2023, 90,260 new apartments came on the market, achieving another near-record – the second highest number since 2012.
The sharpest supply increase in 4Q2023 year-over-year was for studios, up 32.6%, followed by one-bedrooms, up 22.2%, and two bedrooms, up 2.3%.
The consequence was that median asking rents for new studio apartments slumped 20.9% in 1Q2024. They fell 11.9% for one-bedrooms, and 1.2% for two bedrooms. However, the median asking rent for new units with three or more bedrooms jumped 9.1% — perhaps because 0.9% fewer were built in 4Q 2023.
Nevertheless, rental affordability varies among markets. Oversupply is putting a cap on rent increases, but deals are harder to find where fewer units have been built. To address housing affordability, Redfin said local and federal leaders should encourage more construction.
“Apartment construction in America tends to skew towards single people, with many builders deterred from focusing on families,” the report noted.
