After 37 Years of Supply Surge... Soaring US Apartment Rents Decline

January New Lease Rent
3.5% ↓ Compared to August Last Year

Apartment rents in major U.S. cities have declined for six consecutive months. Due to interest rate hikes causing home prices to fall, and a 'supply bomb' expected for the first time in 37 years this year, rental prices are anticipated to remain weak for the time being.

On the 27th (local time), the U.S. Wall Street Journal (WSJ) reported, citing Apartment List, that the median rent for new apartment leases in January this year was $1,338 (approximately 1.77 million KRW), down 3.5% from August last year ($1,386, approximately 1.84 million KRW). As a result, the median rent showed a decline for six consecutive months for the first time in five years.

By city, apartment rents in Seattle fell by 8%. In Boston and Las Vegas, rents dropped by 6% each. Among the 52 major cities surveyed by Apartment List, none saw rent increases since August last year.

Until now, U.S. apartment rents surged significantly after COVID-19, driven by expanded market liquidity and a sharp increase in housing demand. The rise over the past two years alone reached 25%. However, the Federal Reserve's aggressive interest rate hikes last year caused home prices to fall, which also curbed the upward trend in apartment rents. The S&P CoreLogic Case-Shiller Home Price Index dropped 3.6% from June to November last year. Additionally, inflation and layoffs reduced tenants' disposable income, leading apartment rents to turn downward in the second half of the year.

Increased new apartment supply in the U.S. is also pushing rents down. According to real estate data research firm CoStar Group, new apartment supply in the U.S. this year is expected to reach about 500,000 units, the highest since 1986. As a result, the tenant's position is shifting from 'Eul (乙)' to 'Gap (甲)'. According to a survey by real estate management software company RealPage, the proportion of apartment residents renewing leases last month was 52%, the lowest level since 2018. This indicates that tenants are seeking better housing conditions, resulting in fewer lease renewals. WSJ noted, "The expansion of new apartment supply provides tenants with more choices," and predicted, "Tenants will find it harder to face rent increases like those in early 2022."

However, it is expected to take time for the rent decline to be reflected in inflation. Among the components of the U.S. Consumer Price Index (CPI) last month, housing costs rose 7.9% compared to the same period last year.

Jay Parsons, an economist at RealPage, stated, "Tenants now have more options when renewing leases," and forecasted, "Landlords are likely to start lowering renewal rents to prevent tenants from leaving."

This content was produced with the assistance of AI translation services.