Data from two separate reports come to different conclusions about whether the national apartment market has shifted to a tenant one or remains in control of landlords.
In one, Redfin points out the rising vacancies landlords are facing as completed residential projects in buildings with five or more units rose 60% year over year on a seasonally-adjusted basis to 484,000 in March.
Another report, by researchers at the Florida Atlantic University, found that Stockton, Calif., was the only metro area in the country’s 100 largest to offer a rental discount, with renters in all other major markets paying a premium for their housing. It found that the average monthly rent in Stockton was about $2,397, just below the $2,400 that the average renter should be paying, based on historical trends.
Redfin’s latest results put the rental vacancy rate at 6.4% in the first quarter, the highest in two years. It also notes that there have been only three other instances when completions were higher, which occurred in the 1980s. “The balance of power in the rental market is tipping back in tenants’ favor as supply catches up with demand,” Taylor Marr, Redfin’s Deputy Chief Economist, said in prepared comments. “That’s easing affordability challenges and giving renters a little wiggle room to negotiate in some areas. Marr also said the scales could tip back in favor of landlords if homebuilders put the brakes on new construction in response to slowing rent growth.
In addition, tenants are staying put, which is further promoting the recent rent deceleration, Redfin said, a trend also seen in the housing market. Why move when there’s economic uncertainty, along with slowing household formation, still-high rental costs and rising prices for other goods and services due to inflation? The Sun Belt saw the biggest declines in rent, which let some renters sign leases at better rates than they did a year ago.
The Florida Atlantic University College of Business agrees there is a slowdown in rent increases, but that this slowdown is occurring most in four north-central and western markets. Annual rent premiums, for example, remain elevated in South and Southwest Florida and while more supply in the months and years ahead will help ease the rent crunch in Florida, “the state’s popularity as a destination means renters and buyers aren’t likely to find many housing discounts,” says researcher Shelton Weeks, of Florida Gulf Coast University, in prepared statements.
But the research also found that premiums were below 1% in multiple cities, such as in Minneapolis (.20%), Las Vegas (.67%) and San Francisco (.85%). The researchers concluded that landlords still have the upper hand in most areas.