Housing Market Takes a Turn for Renters

A sign advertising units for rent is displayed outside of a Manhattan building on April 11, 2024 in New York City. New rental units are seeing a drop in prices, according to Redfin.

Prices for new apartments plunged to begin the year as the supply of properties entered the market, giving renters more options and, in turn, reducing the cost of leasing a home, according to real estate platform Redfin.

The median asking price for renting a new studio apartment declined by close to 21 percent in the first quarter of 2024. One-bedroom apartment prices also fell by nearly 12 percent, while two-bedrooms saw their cost of a lease drop by more than 1 percent. The only units that saw a price hike were three-bedrooms, suggesting that demand for those types of properties was elevated, Redfin revealed.

Rental prices are dropping amid an influx of newly completed properties started amid the heightened demand during the COVID pandemic that is now becoming available in the market. The increased supply is not being matched by demand, leading to a fall in prices.

It's taking longer for new apartments to find renters than in the past. According to Redfin, 47 percent were rented within the first three months of coming into the market, compared to 60 percent a year ago, the lowest share since 2020.

The housing market has seen a record number of new apartments available. More than 90,000 new units were finished in the fourth quarter of 2023, Redfin pointed out, which has contributed to a nearly 7 percent vacancy rate—the highest level in three years.

"Completions are still near their record high because there were so many construction projects kicked off during the pandemic moving frenzy that are just now being finished," Redfin said in its analysis. "This backlog of new units is putting a lid on how much rent prices can grow. But at the same time, demand from renters who can't afford to buy their own homes is keeping rents near their record high."

Mortgage rates have been elevated and are now hovering at 7 percent while the sale price of homes is also high, making renters, who could be buyers, unable to afford to purchase a home.

The rise in rental prices—they jumped by nearly 1 percent in May—is putting pressure on Americans' pockets. Renters have to earn at least $11,000 more to afford their homes.

Building more units will offer more choices and help with the affordability challenge, said Redfin senior economist Sheharyar Bokhari.

"Building more housing is a tried and true way to ease the housing affordability crisis, and with rent and home prices at historic highs, local and federal leaders should continue to encourage more construction," Bokhari said.

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