In its March report, Apartment List reported that rent prices in the country had increased slightly after declining for six months.
According to the Apartment List Research Team, “this turnaround is consistent with the rental market’s seasonal pattern, as we approach the time of year when moving activity slowly picks up again after bottoming out around the holidays.”
According to the National Association of Realtors, the median rent across the country now stands at $1,377. Rent prices picked up 0.2 percent in February.
Inflation in rents is declining
According to Apartment List’s report, the slowdown in the rental market is gradually reflected in inflation numbers.
Inflation numbers have been affected by the cooling of the apartment rental market and lower prices. However, the national median rent is still more than $200 per month higher than it was just three years ago.
Rent costs have driven inflation numbers in official federal data for months, according to The Wall Street Journal. Rent costs may not respond to increases in Federal Reserve interest rates, as other prices may.
Economists have been baffled by why rents haven’t followed suit. This is particularly true since, with the exception of the consumer price index by the Bureau of Labor Statistics, almost every other data source seems to indicate that these costs have been cooling significantly – or even declining – since growth peaked in early 2007.
In addition to the fact that the government only measures rents and inflation once every six months, even if the rent changes during that time, part of the problem with measuring rents and inflation is that each rental unit is only captured in the government surveys every six months. Rent is tracked by the Bureau of Labor Statistics for all tenants, not just those who start new leases – tenants staying in the same place for a year or more may not see their costs change as rapidly as those who begin new leases.
There is no clear explanation for why there is such a large difference month after month, according to economists.
Vacancies continue to rise
According to our vacancy index, the supply side of the market continues to trend higher and stands at 6.6% today. We expect that vacant units on the market will continue to be plentiful in the year ahead, particularly since this year should bring the most apartment completions in decades,” the report states.
Where do we go from here?
A robust construction pipeline is expected to bring new units throughout the year, allowing rent increases to be moderated as a result of historical seasonal patterns.
Rental demand may rebound in the coming year, despite improving sentiment about macroeconomic conditions, but to a degree that outweighs all the new supply.
